
Class h D\^\ 

Rnnk - G 3 3 

\ 9 ^1 ^ 
Copyright N° 



COPYRIGHT DEPOSm 



/ 



THE SCIENCE OF POLITICAL ECONOMY 



But let none expect any great promotion 
of the sciences, especially in their effective 
part, unless natural philosophy be drawn 
out to particular sciences ; and again unless 
these particular sciences be brought back 
again to natural philosophy. From this de- 
fect it is that as ronomy, optics, music, 
many mechanical arts, and what seems 
stranger, even moral and civil philosophy 
and logic, rise but little above their founda- 
tions, and only skim over the varieties and 
surface of things, viz., because after these 
particular sciences are formed and divided 
off they are no longer nourished by natural 
philosophy, which might give them strength 
and increase ; and therefore no wonder if 
the sciences thrive not when separated 
from their roots.— ^acow, Novtcm Organwm. 




r^,,yr^:y/,./:t»!n./l^Sfr !>£,./' K 



THE SCIENCE 



OF 



POLITICAL ECONOMY 



BY 



HENRY GEORGE 



Author of ' ' Progress and Poverty, " " Protection or Free Trade? " " Social Problems, 

' ' A Perplexed Philosopher, " " The Condition of Labor, " -The Land 

Question," "Property in. Land," etc. 




NEW YORK 
DOUBLEDAY & McCLURE CO. 

1898 

I. 



T./f 



cD 



*AQ-i o 



91. 



Copyright, 1897, by 
Annie C. George 



ft 



6' 



-b 



Take, since you bade it should bear, 
These, of the seed of your sowing- 
Blossom or berry or weed. 
Sweet though they be not, or fair, 
That the dew of your word kept growing ; 
Sweet at least was the seed. 

—Swinburne to Mazzini. 

TO 

AUGUST LEWIS OF NEW YORK 

AND 

TOM L. JOHNSON OF CLEVELAND, OHIO, 

WHO, OF THEIR OWN MOTION, AND WITHOUT SUGGESTION OR 
THOUGHT OP MINE, HAVE HELPED ME TO THE 
LEISURE NEEDED TO WRITE IT, I AFFEC- 
TIONATELY DEDICATE WHAT IN 
THIS SENSE IS THEIR 
WORK 



PREFATORY NOTE. 

THIS work, begun in 1891, after returning from a 
lecturing tour through Australia and a trip around 
the world, grew out of the author's long-cherished purpose 
to write a small text-book, which should present in brief 
the principles of a true political economy. This '' Primer 
of Political Economy " was to set forth in direct, didactic 
form the main principles of what he conceived to be an 
exact and indisputable science, leaving controversy for a 
later and larger work. 

Before proceeding far, however, the author realized the 
difficulty of making a simple statement of principles while 
there existed so much confusion as to the meaning of 
terms. He therefore felt impelled to change his plan, and 
first to present the larger work, which should recast polit- 
ical economy and examine and explicate terminology as 
well as principles ; and which, beginning at the beginning, 
should trace the rise and partial development of the science 
in the hands of its founders a century ago, and then show 
its gradual emasculation and at last abandonment by its 
professed teachers— accompanying this with an account of 
the extension of the science outside and independently of 
the schools, in the philosophy of the natural order now 
spreading over the world under the name of the single tax. 

Soon after this work had got well under way the author 
laid it aside to write a brochure in reply to a papal encyc- 
lical ("The Condition of Labor," 1891), and again later 



vi PREFATORY NOTE. 

to write a book exposing Mr. Herbert Spencer's recantation 
of principles on tbe land question (" A Perplexed Philoso- 
pber," 1892). Save for these interruptions, and occasional 
newspaper and magazine writing, and lecturing and polit- 
ical speaking, he devoted himself continuously to his great 
undertaking until he entered the mayoralty campaign, 
toward the close of which death came, October 29, 1897. 

" The Science of Political Economy," if entirely finished 
as planned by the author, would have shown Book V., on 
Money, extended, and the nature and function of the laws 
of Wages, Interest and Rent fully considered in Book IV. ; 
but the work as left was^ in the opinion of its author, 
in its main essentials completed, the broken parts, to quote 
his own words a few days before his death, ''indicating 
the direction in which my [his] thought was tending." 

The author's preface is fragmentary. It bears in the 
manuscript a penciled date, "March 7, 1894," and is here 
transcribed from a condensed writing used by him in his 
preliminary " roughing-out " work. 

Aside from the filhng in of summaries in four chapter 
headings (indicated by foot-notes), the addition of an 
index, and the correction of a few obvious clerical errors, 
the work is here presented exactly as it was left by the 
author— the desire of those closest to him being that it 
should be given to the world untouched by any other 
hand. 

Henry George, Jr. 

New York, February 1, 1898. 



PREFACE. 

IN " Progress and Poverty " I recast political economy 
in what were at the time the points which most needed 
recasting. Criticism has but shown the soundness of the 
views there expressed. 

But " Progress and Poverty " did not cover the whole 
field of political economy, and was necessarily in large 
measure of a controversial rather than of a constructive 
nature. To do more than this was at the time beyond the 
leisure at my command. Nor did I see fully the necessity. 
For while I realized the greatness of the forces which 
would throw themselves against the simple truth which 
I endeavored to make clear, I did think that should 
"Progress and Poverty" succeed in commanding anything 
like wide attention there would be at least some of the 
professed teachers of political economy who, recognizing 
the ignored truths which I had endeavored to make clear, 
would fit them in with what of truth was already under- 
stood and taught. 

The years which have elapsed since the publication of 
"Progress and Poverty" have been on my part devoted 
to the propagation of the truths taught in " Progress and 
Poverty" by books, pamphlets, magazine articles, news- 
paper work, lectures and speeches, and have been so 
greatly successful as not only far to exceed what fifteen 
years ago I could have dared to look forward to in this 
time, but to have given me reason to feel that of all the 

vii 



viii PEEFACE. 

men of whom I have ever heard who have attempted any- 
thing like so great a work against anything like so great 
odds, I have been in the result of the endeavor to arouse 
thought most favored. 

Not merely wherever the English tongue is spoken, but 
in all parts of the world, men are arising who will carry 
forward to final triumph the great movement which '' Prog- 
ress and Poverty " began. The great work is not done, 
but it is commenced, and can never go back. 

On the night on which I finished the final chapter of 
'' Progress and Poverty" I felt that the talent intrusted 
to me had been accounted for— felt more fully satisfied, 
more deeply grateful than if all the kingdoms of the earth 
had been laid at my feet ; and though the years have jus- 
tified, not dimmed, my faith, there is still left for me 
something to do. 

But this reconstruction of political economy has not 
been done. So I have thought it the most useful thing I 
could do to drop as far as I could the work of propaganda 
and the practical carrying forward of the movement to 
do this. 



GENERAL CONTENTS. 



GRAND DIVISIONS. 

GENERAL INTRODUCTION. 
BOOK I.— THE MEANING OF POI.ITICA1L ECONOMY. 
BOOK II.— THE NATURE OF WEALTH. 
BOOK III.— THE PRODUCTION OF WEALTH. 
BOOK IV.— THE DISTRIBUTION OF WEALTH. 

BOOK v.— MONEY— THE MEDIUM OF EXCHANGE AND MEA- 
SURE OF VALUE. 



SUB-DIVISIONS. 

FAOB 

GEI^TERAIi INTRODUCTION . . xxix 



BOOK I. 
THE MEANING OF POIilTICAL ECONOMY. 

INTRODUCTION TO BOOK 1 7 

CHAPTER I. 
THE THREE FACTORS OF THE WORLD. 

SHOWING THE CONSTITUENTS OF ALL WE PERCEIVE. 

Meaning of factor ; and of philosophy ; and of the world — What 
we call spirit — What we call matter — What we call energy — 



GENERAL CONTENTS. 

PAGE 

Though these three may be at bottom one, we must separate 
them in thought — Priority of spirit 9 



CHAPTER II. 
MAN, HIS PLACE AND POWERS. 

SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALITIES 
THAT ENABLE US TO EXTEND OUR KNOWLEDGE OF IT AND OUR 
POWERS ON IT. 

Man's earliest knowledge of his habitat — How that knowledge 
gi'ows, and what civilized men now know of it — The essential 
distinction between man and other animals — In this lies his 
power of producing and improving 11 

CHAPTER III. 
HOW MAN'S POWERS ARE EXTENDED. 

SHOWING THAT THEIR USE OP REASON WELDS MEN INTO 
THE SOCIAL ORGANISM OR ECONOMIC BODY. 

Extensions of man's powers in civilization — Due not to improve- 
ment in the individual but in the society — Hobbes's ''Levia- 
than " — The Greater Leviathan — This capacity for good also 
capacity for evil 19 



CHAPTER rV. 
CIVILIZATION — WHAT IT MEANS. 

SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OF 
MEN INTO THE SOCIAL ORGANISM OR ECONOMIC BODY. 

Vagueness as to what civilization is — Guizot quoted — Deriva- 
tion and original meaning — Civilization and the State — Why 
a word referring to the precedent and greater has been taken 
from one referring to the subsequent and lesser . . .24 



CHAPTER V. 
THE ORIGIN AND GENESIS OF CIVILIZATION. 

SHOWING THE NATURE OF REASON ; AND HOW IT IMPELS TO 
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS. 

Reason the power of tracing causal relations — Analysis and syn- 
thesis — Likeness and unlikeness between man and other ani- 



GENERAL CONTENTS. xi 

PAGE 

mals — Powers that the apprehension of causal relations gives — 
Moral connotations of civilization— But begins with and in- 
creases through exchange — Civilization relative, and exists in 
the spiritual 29 



CHAPTER VI. 
OF KNOWLEDGE AND THE GROWTH OF KNOWLEDGE. 

SHOWING THAT THE GROWTH OF KNOWLEDGE IS BY COOPER- 
ATION, AND THAT IT INHERES IN THE SOCIETY. 

Civilization implies greater knowledge — This gain comes from 
cooperation — The incommunicable knowing called skill — The 
communicable knowing usually called knowledge — The rela- 
tion of systematized knowledge to the means of storing know- 
ledge, to skill and to the economic body— Illustration from as- 
tronomy 39 



CHAPTER VII. 
OF SEQUENCE, CONSEQUENCE AND LAWS OF NATURE. 

SHOWING THE PROPER MEANING OP SEQUENCE AND OF CON- 
SEQUENCE, AND WHY WE SPEAK OF LAWS OF NATURE. 

Coexistence and succession — Sequence and consequence — Causes 
in series ; names for them — Our direct knowledge is of spirit 
— Simplest perception of causal relation — Extensions of this — 
The causal search unsatisfied till it reaches spirit — And finds 
or assumes intent — Early evidences of this — Why we must 
assume a superior spirit— Evidences of intent — The word 
nature and its implication of will or spirit — The word law — 
The term " law of nature " 44 



CHAPTER Vin. 
OF THE KNOWLEDGE PROPERLY CALLED SCIENCE. 

SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OP NATURE, 
AND THAT IN THE CURRENT POLITICAL ECONOMY THIS HAS 
BEEN FORGOTTEN. 

Proper meaning of science — It investigates laws of nature, not 
laws of man — Distinction between the two— Their confusion 
in the current political economy— Mason and Lalor's "Primer 
of Political Economy " quoted — Absurdity of this confusion — 
Turgot on the cause of such confusions 58 



xii GENERAL CONTENTS. 

CHAPTER IX. 
THE ECONOMY CALLED POLITICAL ECONOMY. 

SHOWING THE MEANING, UNITS AND SCOPE OP POLITICAL 
ECONOMY. 

PAGE 

The word economy— The word political— Origin of the term 
"political economy" and its confusions — It is not concerned 
with the body politic, but with the body economic — Its units, 
and the system or arrangement of which it treats — Its scope . 65 

CHAPTER X. 
THE ELEMENTS OF POLITICAL ECONOMY. 

SHOWING HOW POLITICAL ECONOMY SHOULD PROCEED AND 
WHAT RELATIONS IT SEEKS TO DISCOVER. 

How to understand a complex system — It is the purpose of such 
a system that political economy seeks to discover — These 
laws, natural laws of human nature — The two elements rec- 
ognized by political economy — These distinguished only by 
reason — Human will affects the material world only through 
laws of nature — It is the active factor in all with which polit- 
ical economy deals 74 

CHAPTER XL 
OF DESIRES AND SATISFACTIONS. 

SHOWING THE WIDTH AND IMPORTANCE OF THE FIELD OP 
POLITICAL ECONOMY. 

Action springs from desire and seeks satisfaction — Order of de- 
sires — Wants or needs — Subjective and objective desires — 
Material and immaterial desires — The hierarchy of life and 
of desires 81 

CHAPTER XII. 
THE FUNDAMENTAL LAW OF POLITICAL ECONOMY. 

SHOWING THAT THE LAW FROM WHICH POLITICAL ECONOMY PRO- 
CEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES WITH 
THE LEAST EXERTION. 

Exertion followed by weariness — The fact that men seek to sat- 
isfy their desires with the least exertion — Meaning and ana- 
logue — Exemplified in trivial things — Is a law of nature and 



GENERAL CONTENTS. xiii 

PAGE 

the fTindamental law of political economy — Substitution of 
selfishness for this principle — Buckle quoted — Political econ- 
omy requires no such assumption — The necessity of labor not 
a curse 86 

CHAPTER XIII. 
METHODS OF POLITICAL ECONOMY. 

SHOWING THE NATURE OP THK METHODS OP INVESTIGATION 
THAT MAY BE USED IN POLITICAL ECONOMT. 

Deductive and inductive schools — "New American Cyclopedia" 
quoted — Triumph of the inductionists — The method of in- 
duction and the method of deduction — Method of hypothesis. 
Bacon's relation to induction — Real error of the deduction- 
ists and the mistake of the inductionists — Lalor's Cyclopedia 
quoted — Result of the triumph of the inductionists — A true 
science of political economy must follow the deductive method 
— ^Davis's ' ' Elements of Inductive Logic " quoted — Double as- 
surance of the real postulate of political economy — Method of 
mental or imaginative experiment 92 

CHAPTER XIV. 
POLITICAL ECONOMY AS SCIENCE AND AS ART. 

SHOWING THAT POLITICAL ECONOMY IS PROPERLY A SCIENCE, 
AND THE MEANING IT SHOULD HAVE IP SPOKEN OP AS ART. 

Science and art — There must be a science of political economy, 
but no proper art — What must be the aim of an art of politi- 
cal economy — White art and black art — Course of further 
investigation 101 



BOOK II. 
THE NATURE OF WEAIiTH. 

INTRODUCTION TO BOOK H 115 

CHAPTER I. 
CONFUSIONS AS TO THE MEANING OF WEALTH. 

SHOWING THE FAILURE OP THE CURRENT POLITICAL ECONOMY TO 
DEFINE WEALTH, AND THE CONFUSIONS THEREFROM, CULMI- 
NATING IN THE ABANDONMENT OF POLITICAL ECONOMY BY ITS 
PROFESSED TEACHERS. 

Wealth the primary term of political economy — Common use 
of the word — Vagueness more obvious in political economy — 



xiv GENERAL CONTENTS. 

PAGE 

Adam Smith not explicit— Increasing conftision of subsequent 
writers — Their deiinitions — Many make no attempt at defini- 
tion — PeiTy's proposition to abandon the term — Marshall and 
Nicholson — Failure to define the term leads to the abandon- 
ment of political economy — This concealed under the word 
"economic"— The intent expressed by Macleod— Eesidts to 
political economy 117 

CHAPTER II. 
CAUSES OF CONFUSION AS TO THE MEANING OF WEALTH. 

SHOWING THE REAL DIFFICULTY THAT BESETS THE 
ECONOMIC DEFINITION OF WEALTH. 

Effect of slavery on the definition of wealth — Similar influences 
now existing — John S. Mill on prevalent delusions — Genesis 
of the protective absurdity — Power of special interests to 
mold common opinion — Of injustice and absurdity, and the 
power of special interests to pervert reason — Mill an example 
of how accepted opinions may blind men — Effect upon a 
philosophical system of the acceptance of an incongruity — 
Meaning of a saying of Christ — Influence of a class profiting 
by robbery shown in the development of political economy — 
Archbishop Whately puts the cart before the horse — The power 
of a great pecuniary interest to affect thought can be ended only 
by abolishing that interest — This shown in American slavery . 131 



CHAPTER III. 
WHAT ADAM SMITH MEANT BY WEALTH. 

SHOWING HOW ESSENTIALLY ADAM SMITH'S PRIMARY CONCEPTION 
OF WEALTH DIFFERED FROM THAT NOW HELD BY HIS SUCCES- 
SORS. 

Significance of the title " Wealth of Nations" — Its origin shown 
in Smith's reference to the Physiocrats — His conception of 
wealth in his introduction — Objection by Malthus and by Mae- 
leod — Smith's primary conception that given in " Progress and 
Poverty " — His subsequent confusions 143 

CHAPTER IV. 
THE FRENCH PHYSIOCRATS. 

SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE 
OF POLITICAL ECONOMY WERE," AND WHAT THEY HELD. 

Quesnay and his followers — The great truths they grasped and 
the cause of the confusion into which they fell — This used to 
discredit their whole system, but not really vital — They were 



GENEEAL CONTENTS. xv 

PAGE 

real free traders — The scant justice yet done them— Eeference 
to them in "Progress and Poverty "— Macleod's statement of 
their doctrine of natural order — Their conception of wealth — 
Their day of hope and their fall 148 



CHAPTER V. 
ADAM SMITH AND THE PHYSIOCRATS. 

SHOWING THE RELATION BETWEEN ADAM SMITH AND THE 
PHYSIOCRATS. 

Smith and Quesnay — The " Wealth of Nations " and Physioeratie 
ideas — Smith's criticism of the Physiocrats — His failure to ap- 
preciate the single tax — His prudence 160 

CHAPTER VI. 
SMITH'S INFLUENCE ON POLITICAL ECONOMY. 

SHOWING WHAT THE "WEALTH OF NATIONS" ACCOMPLISHED 
AND THE COURSE OF THE SUBSEQUENT DEVELOPMENT OF PO- 
LITICAL ECONOMY. 

Smith, a philosopher, who addi-essed the cultured, and whose at- 
tack on mercantilism rather found favor with the powerful land- 
owners — Not entirely exempt from suspicion of radicalism, yet 
pardoned for his affiliation with the Physiocrats — Efforts of 
Malthus and Rieardo on respectabilizing the science — The fight 
against the corn-laws revealed the true beneficiaries of protec- 
tion, but passed for a free-trade victory, and much strength- 
ened the incoherent science — Confidence of its scholastic ad- 
vocates — Say's belief in the result of the colleges taking up 
political economy — Torrens's confidence — Failure of other 
countries to follow England's example — Cairnes doubts the 
effect of making it a scholastic study — His sagacity proved 
by the subsequent breakdown of Smith's economy — The true 
reason 170 

CHAPTER VII. 

INEFFECTUAL GROPINGS TOWARD A DETERMINA- 
TION OF WEALTH. 

SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY 
BEFORE "progress AND POVERTY." 

Illogical character of the "Wealth of Nations "—Statements of 
natural right- Spence, Ogilvie, Chalmers, Wakefield, Spencer, 
Dove, Bisset — Vague recognitions of natural right — Protec- 
tion gave rise to no political economy in England, but did else- 



xvi GENEEAL CONTENTS. 

PAGE 

where — Germany and protectionist political economy in the 
United States — Divergence of the schools — Trade-unionism 
in socialism 182 

CHAPTER VIII. 
BREAKDOWN OF SCHOLASTIC POLITICAL ECONOMY. 

SHOWING THE KEASON, THE RECEPTION, AND EFFECT ON PO- 
LITICAL ECONOMY OF "PROGRESS AND POVERTY." 

"Progress and Poverty" — Preference of professors to abandon 
the " science " rather than radically change it, brings the break- 
down of scholastic economy — The "Encyclopaedia Britannica" 
— The "Austrian school" that has succeeded the "classical" 200 

CHAPTER IX. 
WEALTH AND VALUE. 

SHOWING THE REASON FOR CONSIDERING THE NATtTRE OF 
VALUE BEFORE THAT OF WEALTH, 

The point of agreement as to wealth — Advantages of proceeding 
from this point 210 

CHAPTER X. 
VALUE IN USE AND VALUE IN EXCHANGE. 

SHOWING THE TWO SENSES OF VALUE; HOW THE DISTINCTION 
HAS BEEN IGNORED, AND ITS REAL VALIDITY ; AND THE REASON 
FOR CONFINING THE ECONOMIC TERM TO ONE SENSE. 

Importance of the term value — Original meaning of the word — 
Its two senses — Names for them adopted by Smith — Utility 
and desirability — Mill's criticism of Smi h — Complete ignor- 
ing of the distinction by the Austrian school — Cause of this 
confusion — Capability of use not usefulness — Smith's distinc- 
tion a real one — The dual use of one word in common speech 
must be avoided in political economy — ^Intrinsic value . . 212 

CHAPTER XI. 

ECONOMIC VALUE— ITS REAL MEANING AND FINAL 
MEASURE. 

SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A RELATION 
OF PROPORTION ; AND THE AMBIGUITY WHICH HAS LED TO THIS. 

The conception of value as a relation of proportion — It is really 
a relation to exertion — Adam Smith's perception of this — His 
reasons for accepting the term value in exchange — His con- 
fusion and that of his successors 226 



GENERAL CONTENTS. xvii 

CHAPTER XII. 
VALUE IN EXCHANGE REALLY RELATED TO LABOR. 

SHOWING THAT VALUE DOES NOT COME FEOM EXCHANGEABILITY, 
BUT EXCHANGEABILITY FROM VALUE, "WHICH IS AN EXPRESSION 
OP THE SAVING OF LABOR INVOLVED IN POSSESSION. 

PAGE 

Root of the assumption that the sum of values cannot increase 
or diminish — The fundamental idea of proportion — We can- 
not really think of value in this way — The confusion that 
makes us imagine that we do — The tacit assumption and re- 
luctance to examine that bolster the current notion — Imagina- 
tive experiment shows that value is related to labor — Common 
facts that prove this — Current assumption a fallacy of undis- 
tributed middle — Various senses of " labor " — Exertion positive 
and exertion negative — Re-statement of the proposition as to 
value — Of desire and its measurement — Causal relationship of 
value and exchangeability — Imaginative experiment showing 
that value may exist where exchange is impossible — Value and 
expression of exertion avoided ....... 235 

CHAPTER Xm. 
THE DENOMINATOR OF VALUE. 

SHOWING WHAT VALUE IS, AND ITS RELATIONS. 

What value is— The test of real value— Value related only to 
human desire— This perception at the bottom of the Austrian 
school— But its measure must be objective--How cost of 
production acts as a measure of value — Desire for similar 
things and for essential things — Application of this principle — 
Its relation to land values 250 

CHAPTER XIV. 
THE TWO SOURCES OF VALUE. 

SHOWING THAT THERE IS A VALUE FROM PRODUCTION AND 
ALSO A VALUE FROM OBLIGATION. 

Value does not involve increase of wealth — Value of obligation 
—Of enslavement— Economic definition of wealth impossible 
without recognition of this difference in value— Smith's con- 
fusion and results— Necessity of the distinction— Value from 
production and value from obligation — Either gives the essen- 

• tial quality of commanding exertion — The obligation of debt — 
Other obligations— Land values most important of all forms 
of value from obligation — Property in land equivalent to 
property in men — Common meaning of value in exchange — 
Real relation with exertion— Ultimate exchangeability is for 
labor— Adam Smith right — Light thi'own by this theory of 
value o . . . 257 



xviii GENEEAL CONTENTS. 

CHAPTER XV. 
THE MEANING OF WEALTH IN POLITICAL ECONOMY. 

SHOWING HOW VALUE FROM PRODUCTION IS WEALTH IN 
POLITICAL ECONOMY. 

PAGE 

Wealth as fixed in "Progress and Poverty" — Course of the 
scholastic political economy — The reverse method of this work 
— The conclusion the same — Reason of the disposition to in- 
clude all value as wealth — Metaphorical meanings — Bull and 
pun — Metaphorical meaning of wealth — Its core meaning — Its 
use to express exchangeability — Similar use of money — Ordi- 
nary core meaning the proper meaning of wealth — Its use in 
individual economy and in political economy — What is meant 
by increase of wealth — Wealth and labor — Its factors nature 
and man — Wealth their resultant — Of Adam Smith — Danger 
of carrying into political economy a meaning proper in indi- 
vidual economy — Example of " money " — " Actual wealth " and 
"relative wealth" — "Value from production" and "value 
from obligation " — The English tongue has no single word for 
an article of wealth — Of "commodities" — Of "goods" — Why 
there is no singular in English — The attempt to form one by 
dropping the " s " and Anglo-German jargon .... 270 



CHAPTER XVL 
THE GENESIS OF WEALTH. 

SHOWING HOW WEALTH ORIGINATES AND WHAT IT ESSEN- 
TIALLY IS. 

Reason of this inquiry — Wealth proceeds from exertion prompted 
by desire, but all exertion does not result in wealth — Simple 
examples of action, and of action resulting in wealth — "Rid- 
ing and tying" — Sub-divisions of effort resulting in increments 
of wealth — Wealth essentially a stored and transferable ser- 
vice — Of transferable service — The action of reason as natural, 
though not as certain and quick as that of instinct — Wealth 
is service impressed on matter — Must be objective and have 
tangible form 285 

CHAPTER XVII. 
THE WEALTH THAT IS CALLED CAPITAL. 

SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS. 

Capital is a part of wealth used indirectly to satisfy desire — 
Simple illustration of fruit — Wealth permits storage of labor — 
The bull and the man — Exertion and its higher powers — Per- 



GENEEAL CONTENTS. xix 

PAGE 

sonal qualities cannot really be wealth or capital — The taboo 
and its modern form — Common opinion of wealth and capital 293 



CHAPTER XVIII. 
WHY POLITICAL ECONOMY CONSIDERS ONLY WEALTH. 

SHOWING THAT POLITICAL ECONOMY, AS PROPERLY STATED, 
COVERS ALL THE RELATIONS OF MEN IN SOCIETY INTO WHICH 
IT IS NECESSARY TO INQUIRE. 

Political economy does not include all the exertions for the 
satisfaction o* material desires ; but it does include the greater 
part of them, and it is through value that the exchange of 
services for services is made — Its duty and province . . 301 

CHAPTER XIX. 
MORAL CONFUSIONS AS TO WEALTH. 

SHOWING HOW RICH AND POOR APE CORRELATIVES, AND 
WHY CHRIST SYMPATHIZED WITH THE POOR. 

The legitimacy of wealth and the disposition to regard it as 
sordid and mean — The really rich and the really poor — They 
are really correlatives — The good sense of Christ's teaching . 304 

CHAPTER XX. 
OF THE PERMANENCE OF WEALTH. 

SHOWING THAT VALTJES PROM OBLIGATION SEEM REALLY TO 
LAST LONGER THAN VALUES FROM PRODUCTION. 

Value from production and value from obligation — The one 
material and the other existing in the spiritual — Superior 
pei'maneuce of the spiritual — Shakespeare's boast — Mascenas's 
buildings and Horace's odes — The two values now existing — 
Franchises and land values last longer than gold and gems — 
Destruction in social advance — Conclusions from all this . 308 



CHAPTER XXI. 
THE RELATION OF MONEY TO WEALTH. 

SHOWING THAT SOME MONEY IS AND SOME MONEY IS NOT 
WEALTH. 

Where I shall treat of money — No categorical answer can yet 
be given to the question whether money is wealth — Some 
money is and some is not wealth 313 



GENEEAL CONTENTS. 

BOOK III. 
THE PRODUCTION OF WEAIiTH. 



CHAPTER I. 
THE MEANING OF PRODUCTION. 

SHOWING THE MEANING AND PROPER USE OF PRODUCTION. 



PAGE 



Production a drawing forth of what before exists—Its difference 
from creation— Production other than of wealth— Includes 
all stages of bringing to be— Mistakes as to it . . . 323 



CHAPTER II. 
THE THREE MODES OF PRODUCTION. 

SHOWING THE COMMON CHARACTER, YET DIFFERENT MODES 
OF PRODUCTION. 

Production involves change, brought about by conscious will — 
Its three modes : (1) adapting, (2) growing, (3) exchanging— 
This the natural order of these modes 327 



CHAPTER III. 
POPULATION AND SUBSISTENCE. 

SHOWING THAT THE THEORY OF A TENDENCY IN POPULATION TO 
INCREASE FASTER THAN SUBSISTENCE HAS PREVIOUSLY BEEN 
EXAMINED AND CONDEMNED. 

The Malthusian theory — Discussed in " Progress and Poverty" . 333 



CHAPTER IV. 

THE ALLEGED LAW OF DIMINISHING RETURNS 
IN AGRICULTURE. 

SHOWING WHAT THIS ALLEGED LAW IS. 

John Stuart Mill quoted as to the importance, relations and 
nature of this law — The reductio ad absurdum by which it 
is proved — Contention that it is a misapprehension of the uni- 
versal law of space 335 



GENERAL CONTENTS. xxi 

CHAPTER V. 
OF SPACE AND TIME. 

SHOWING THAT HUMAN REASON IS ONE, AND SO FAB AS IT 
CAN GO MAY BE RELIED ON. 

Purpose of this work — Of metaphysics — Danger of thinking of 
words as things — Space and time not conceptions of things, 
but of relations of things — They cannot, therefore, have 
independent beginning or ending — The verbal habit which 
favors this idea — How favored by poets and by religious 
teachers— How favored by philosophers — Of Kant — Of Scho- 
penhauer — Mysteries and antinomies that are really confusions 
in the meaning of words — Human reason and the eternal reason 
— Philosophers who are really word-jugglers .... 339 

CHAPTER VI. 

CONFUSION OF THE SPACIAL LAW WITH AGRI- 
CULTURE. 

SHOWING THE GENESIS OF THIS CONFUSION. 

What space is — The place to which man is confined — Extension 
a part of the concept, land — Perception is by contrast — Man's 
first use of land is by the mode of adapting — His second, and 
for a long time most important, use is by growing — The third, 
on which civilization is now entering, is exchanging — Political 
economy began in the second, and growing still attracts most 
attention — The truth and error of the Physiocrats — The suc- 
cessors of Smith, while avoiding the error of the Physiocrats, 
also ignored their truth ; and with their acceptance of the Mal- 
thusiau theory, and Ricardo's explanation of rent as relating 
to agricultural land, they fell into, and have continued the 
habit of treating land and rent as agricultural — Difficulty of 
the single tax in the United States 351 

CHAPTER VII. 
THE RELATION OF SPACE IN PRODUCTION. 

SHOWING THAT SPACE HAS RELATION TO ALL MODES OF 
PRODUCTION. 

Matter being material, space must have relation to all produc- 
tion — This relation readily seen in agriculture — The concen- 
tration of labor in agriculture tends up to a certain point to 
increase and then to diminish production — But it is a mis- 
apprehension to attribute this law to agriculture or to the 
mode of growing— It holds in all modes and sub-divisions of 



xii GENERAL CONTENTS. 

PAGE 

these modes — Instances : of the production of brick, of the mere 
storage of brick — Man himself requires space — The division of 
labor as requiring space — Intensive and extensive use of land 357 



CHAPTER VIII. 
THE RELATION OF TIME IN PRODUCTION. 

SHOWING THAT ALL MODES OF PRODUCTION HAVE RELATION 
TO TIME. 

Difference between apprehensions of space and time, the one 
objective, the other subjective — Of spirits and of creation — 
All production requires time— The concentration of labor in 
time 365 

CHAPTER IX. 
COOPERATION — ITS TWO WAYS. 

SHOWING THE TWO WAYS OF COOPERATION. 

Cooperation is the union of individual powers in the attainment 
of common ends — Its ways and their analogues : (1) the com- 
bination of effort ; (2) the separation of effort — Illustrations : 
of building houses, of joint-stock companies, etc. — Of sailing a 
boat — The principle shown in naval architecture — The Erie 
Canal — The baking of bread — Production requires conscious 
thought — The same principle in mental effort — What is on 
the one side separation is on the other concentration — Extent 
of concentration and specialization of work in modern civiliza- 
tion — The principle of the machine — Beginning and increase 
of division of labor — Adam Smith's three heads — ^A better 
analysis 371 

CHAPTER X. 
COOPERATION — ITS TWO KINDS. 

SHOWING THE TWO KINDS OF COOPERATION, AND HOW THE 
POWER OF THE ONE GREATLY EXCEEDS THAT OF THE OTHER. 

The kind of cooperation which, as to method of union or how of 
initiation, results from without and may be called directed 
or conscious cooperation — Another proceeding from within 
which may be called spontaneous or unconscious cooperation 
— Types of the two kinds and their analogues — Tacking of a 
full-rigged ship and of a bird — Intelligence that suffices for 
the one impossible for the other — The savage and the ship — 
Unconscious cooperation required in ship-building — Conscious 
cooperation will not suffice for the work of unconseioiis — The 
fatal defect of socialism — The reason of this is that the power 
of thought is spiritual and cannot be fused as can physical 



GENERAL CONTENTS. xxiii 

PAGE 

force — Of "man power "and "mind power" — Illustration from 
the optician — Impossibility of socialism — Society a Leviathan 
greater than that of Hobbes 382 

CHAPTER XI. 
THE OFFICE OF EXCHANGE IN PRODUCTION. 

SHOWING THAT IN MAN THE LACK OF INSTINCT IS SUPPLIED 
BY THE HIGHER QUALITY OF REASON, WHICH LEADS TO EX- 
CHANGE. 

The cooperation of ants and bees is from within and not from 
without ; from instinct and not from direction — Man has little 
instinct ; but the want supplied by reason — Reason shows 
itself in exchange — This suffices for the unconscious coopera- 
tion of the economic body or Greater Leviathan — Of the three 
modes of production, exchanging is the highest — Mistake of 
writers on political economy — The motive of exchange . . 397 



CHAPTER XII. 
OFFICE OF COMPETITION IN PRODUCTION. 

SHOWING THAT COMPETITION BRINGS TRADE, AND CONSE- 
QUENTLY SERVICE, TO ITS JUST LEVEL. 

"Competition is the life of trade," an old and true adage — The 
assumption that it is an evil springs from two cfAises — one 
bad, the other good — The bad cause at the root of protection- 
ism — Law of competition a natural law — Competition neces- 
sary to civilization 402 

CHAPTER XIII. 
OF DEMAND AND SUPPLY IN PRODUCTION . 404 

CHAPTER XIV. 
ORDER OF THE THREE FACTORS OF PRODUCTION. 

SHOWING THE AGREEMENT OP ALL ECONOMISTS AS TO THE 
NAMES AND ORDER OF THE FACTORS OF PRODUCTION, 

Land and labor necessary elements in production — Union of a 
composite element, capital — Reason for dwelling on this agree- 
ment as to order 405 

CHAPTER XV. 
THE FIRST FACTOR OF PRODUCTION— LAND. 

SHOWING THAT LAND IS THE NATURAL OR PASSIVE FACTOR 
IN ALL PRODUCTION. 

The term land— Landowners— Labor the only active factor , 408 



GENERAL CONTENTS. 



CHAPTER XVI. 
THE SECOND FACTOR OF PRODUCTION— LABOR. 

SHOWTNG THAT LABOR IS THE HUMAN OR ACTIVE FACTOR 
IN ALL PRODUCTION. 

PAGE 

The term labor — It is the only active factor in producing wealth, 
and by nature spiritual 411 

CHAPTER XVII. 
THE THIRD FACTOR OF PRODUCTION— CAPITAL. 

SHOWING THAT CAPITAL IS NOT A PRIMARY FACTOR, BUT PROCEEDS 
FROM LAND AND LABOR, AND IS A FORM OR USE OF WEALTH. 

Capital is essentially labor raised to a higher power — Where it 
may, and where it must aid labor — In itself it is helpless . 413 

BOOK IV. 
THE DISTRIBUTION OF WEAIjTH. 

INTRODUCTION TO BOOK IV 421 

CHAPTER I. 
THE MEANING OF DISTRIBUTION. 

SHOWING THE MEANING AND USES OF THE WORD DISTRIBUTION ; 
THE PLACE AND MEANING OF THE ECONOMIC TERM ; AND THAT 
IT IS CONCERNED ONLY WITH NATURAL LAWS. 

Derivation and uses of the word — Exchange, consumption and 
taxation not proper divisions of political economy — Need of a 
consideration of distribution — It is the continuation and end 
of what begins in production, and thus the final division of 
political economy — The meaning usually assigned to distribu- 
tion as an economic term, and its true meaning . . . 423 

CHAPTER II. 
THE NATURE OF DISTRIBUTION. 

SHOWING THE FALLACY OF THE CONTENTION THAT DISTRIBUTION 
IS A MATTER OP HUMAN LAW; THAT THE NATURAL LAWS OF 
DISTRIBUTION ARE MANIFEST NOT ON WEALTH ALREADY PRO- 
DUCED, BUT ON SUBSEQUENT PRODUCTION ; AND THAT THEY ARE 
MORAL LAWS. 

John Stuart Mill's argument that distribution is a matter of hu- 
man law — Its evidence of the imscientiflc character of the 



GENERAL CONTENTS. xxv 

PAGE 

scholastic economy — The fallacy it involves and the confusion 
it shows — Illustration from Bedouin and from civilized society 
— Natural laws of distribution do not act upon wealth already 
produced, but on future production — Reason of this — Illustra- 
tion of siphon and analogy of blood 430 

CHAPTER III. 
THE COMMON PERCEPTION OF NATURAL LAW IN 
DISTRIBUTION. 

SHOWING THE COMMON AND INERADICABLE PERCEPTION OF 
NATURAL LAWS OF DISTRIBUTION. 

Mill's admission of natural law in his argument that distribution 
is a matter of himian law — Sequence and consequence— Human 
will and the will manifest in nature — Inflexibility of natural 
laws of distribution — Human will powerless to affect distribu- 
tion — This shown by attempts to affect distribution through 
restriction of production — Mill's confusion and his high char- 
acter 440 

CHAPTER IV. 
THE REAL DIFFERENCE BETWEEN LAWS OF 
PRODUCTION AND OF DISTRIBUTION. 

SHOWING THAT DISTRIBUTION HAS REFERENCE TO ETHICS, 
WHILE PRODUCTION HAS NOT. 

The laws of production are physical laws ; the laws of distribu- 
tion moral laws, concerned only with spirit — This the reason 
why the immutable character of the laws of distribution is more 
quickly and clearly recognized 450 

CHAPTER V. 
OF PROPERTY. 

SHOWING THAT PROPERTY DEPENDS UPON NATURAL LAW. 

The law of distribution must be the law which determines owner- 
ship — John Stuart Mill recognizes this ; but extending his error, 
treats property as a matter of human institution solely — His 
assertion quoted and examined — His utilitarianism — His 
further contradictions 454 

CHAPTER VI. 
CAUSE OF CONFUSION AS TO PROPERTY. 

SHOWING WHY AND HOW POLITICAL ECONOMISTS FELL INTO 
SUCH CONFUSIONS WITH REGARD TO PROPERTY. 

Mill blinded by the pre-assumption that land is property — He all 
but states later the true principle of property, but recovers by 



xvi GENEEAL CONTENTS. 

PAGE 

substituting in place of the economic term " land," the word in 
its colloquial use — The different senses of the word illustrated 
from the shore of New York harbor — Mill attempts to justify 
property in land, but succeeds only in justifying property in 
wealth 460 



BOOK V. 

MONET— THE MEDIUM OF EXCHANGE AND 

MEASURE OF VALUE. 

INTEODUCTION TO BOOK V 477 

CHAPTER I. 
CONFUSIONS AS TO MONEY. 

SHOWING THE DIVERGENCE IN COMMON THOUGHT AND AMONG 
ECONOMISTS AS TO MONEY. 

Present confusions as to money — Their cause — How to disen- 
tangle them 479 

CHAPTER n. 
THE COMMON UNDERSTANDING OF MONEY. 

SHOWING THAT THE COMMON USE OF MONEY IS TO BUT THINGS 
WITH, AND THAT ITS ESSENTIAL CHARACTER IS NOT IN ITS MA- 
TERIAL, BUT IN ITS USE. 

The use of money to exchange for other things — Buying and sell- 
ing — Illustration of the travelers — Money not more valuable 
than other things, but more readily exchangeable — Exchanges 
without money — Checks, etc., not money — Different money in 
different countries — But money not made by government fiat — 
Does not necessarily consist of gold and silver — Or need intrin- 
sic value — Its essential quality and definition .... 482 

CHAPTER HI. 
MEDIUM OF EXCHANGE AND MEASURE OF VALUE. 

SHOWING HOW THE COMMON MEDIUM OP EXCHANGE BECOMES THE 
COMMON MEASURE OP VALUE, AND WHY WE CANNOT FIND A COM- 
MON MEASURE IN LABOR. 

Money is most exchanged — Why not measure value by labor? 
— Smith's unsatisfactory answer — The true answer — Labor can 
afford no common measure, and commodities are preferably 



GENERAL CONTENTS. xxvii 

PAGE 

taken — Survivals of common measures — Difference in common 
measures does not prevent exchange 495 

CHAPTER IV. 
THE OFFICE OF CREDIT IN EXCHANGES. 

SHOWING THAT THE ADVANCE OF CIVILIZATION ECONOMIZES 
THE USE OF MONEY. 

Tendency to over-estimate the importance of money — Credit 
existed before the use of money began — And it is now and 
always has been the most important instrument of exchange — 
Illustration of shipwrecked men — Adam Smith's error as to 
barter — Money's most important use to-day is as a measure of 
value 504 

CHAPTER V. 
THE GENESIS OF MONEY. 

SHOWING THAT THE LAW OF GKATIFYING DESIRES WITH THE 
LEAST EXERTION PROMPTS THE USE FROM TIME TO TIME OF 
THE MOST LABOR-SAVING MEDIUM AVAILABLE. 

Money not an invention, but developed by civilization — It grows 
with the growth of exchanges — Exchange first of general com- 
modities — Then of the more convenient commodities — Then 
of coin, whose commodity value comes to be forgotten — Illus- 
tration of the American trade dollar — The lessening uses of 
commodity money and extensions of credit money — Two ele- 
ments in exchange value of metal coin : intrinsic, or value of 
the metal itself ; and seigniorage — Meaning of seigniorage — 
Exchange value of paper money is seigniorage — Use of money 
is not for consumption, but exchange — Proprietary articles as 
mediums of exchange — Mutilated coins — When lessening metal 
value in coins does not lessen circulating value — The essential 
being that both represent the same exertion — This the reason 
why paper money exchanges equally with metal money of like 
denomination 512 

CHAPTER VI. 
THE TWO KINDS OF MONEY. 

SHOWING THAT ONE ORIGINATES IN VALUE FROM PRODUC- 
TION AND THE OTHER IN VALUE FROM OBLIGATION. 

Money peculiarly the representative of value — Two kinds of 
money in the more highly civilized world — Commodity money 
and value from production — Credit money and value from obli- 
gation — Of credit money — Of commodity money — Of intrinsic 
value — Gold coin the only intrinsic value money now in cir- 
culation in the United States, England, France or Germany 526 



GENERAL INTRODUCTION 



For tho' the Griant Ages heave the hill 
And break the shore, and evermore 

Make and break, and work their will ; 
Tho' world on world in myriad myi-iads roll 

Round us, each with different powers 

And other forms of life than ours, 
"What know we greater than the soul? 
— Ten7iyson. 



OENERAL INTEODUCTION. 

REASON OF THIS WORK. 

I SHALL try in this work to put in clear and systematic 
form the main principles of political economy. 

The place I would take is not that of a teacher, who 
states what is to be believed, but rather that of a guide, 
who points out what by looking is to be seen. So far from 
asking the reader blindly to follow me, I would urge him 
to accept no statement that he himself can doubt, and to 
adopt no conclusion untested by his own reason. 

This I say, not in unfelt deprecation of myself nor in 
idle compliment to the reader, but because of the nature 
and present condition of political economy. 

Of all the sciences, political economy is that which to 
civilized men of to-day is of most practical importance. 
For it is the science which treats of the nature of wealth 
and the laws of its production and distribution ; that is to 
say, of matters which absorb the larger part of the thought 
and effort of the vast majority of us— the getting of a liv- 
ing. It includes in its domain the greater part of those 
vexed questions which lie at the bottom of oui- politics and 
legislation, of our social and governmental theories, and 
even, in larger measure than may at first be supposed, of 
our philosophies and religions. It is the science to which 
must belong the solving of problems that at the close of a 
century of the greatest material and scientific development 



xxsii GENERAL INTRODUCTION. 

the world has yet seen, are in all civilized countries clouding 
the horizon of the future— the only science that can enable 
our civilization to escape already threatening catastrophe. 

Yet, surpassing in its practical importance as pohtical 
economy is, he who to-day would form clear and sure ideas 
of what it really teaches must form them for himself. For 
there is no body of accepted truth, no consensus of recog- 
nized authority, that he may without question accept. In 
all other branches of knowledge properly called science the 
inquirer may find certain fundamentals recognized by aU 
and disputed by none who profess it, which he may safely 
take to embody the information and experience of his time. 
But, despite its long cultivation and the multitude of its 
professors, he cannot yet find this in political economy. 
If he accepts the teaching of one -^Titer or one school, it 
will be to find it denied by other writers and other schools. 
This is not merely true of the more complex and delicate 
questions, but of primary questions. Even on matters 
such as in other sciences have long since been settled, he 
who to-day looks for the guidance of general acceptance 
in political economy will find a chaos of discordant opin- 
ions. So far indeed are first principles from being agreed 
on, that it is still a matter of hot dispute whether protec- 
tion or free trade is most conducive to prosperity— a ques- 
tion that in political economy ought to be capable of as 
certain an answer as in hydrodynamics the question 
whether a ship ought to be broader than she is long, or 
longer than she is broad. 

This is not for want of what passes for systematic study. 
Not only are no subjects so widely and frequently discussed 
as those that come within the province of political economy, 
but every university and college has now its professor 
of the science, whose special business it is to study and 
to teach it. But nowhere are inadequacy and confusion 
more apparent than in the writings of these men ; nor is 



GENERAL INTRODUCTION. xxxiii 

anything so likely to give the impression that there is not 
and cannot be a real science of political economy. 

But while this discordance shows that he who would 
reaUy acquaint himself with political economy cannot rely 
upon authority, there is in it nothing to discourage the 
hope that he who will use his own reason in the honest 
search for truth may attain firm and clear conclusions. 

For in the supreme practical importance of political 
economy we may see the reason that has kept and still 
keeps it in dispute, and that has prevented the growth of 
any body of accepted and assured opinion. 

Under existing conditions in the civilized world, the 
great struggle among men is for the possession of wealth. 
Would it not then be irrational to expect that the science 
which treats of the production and distribution of wealth 
should be exempt from the influence of that struggle? 
Macaulay has well said that if any large pecuniary interest 
were concerned in disputing the attraction of gravitation, 
that most obvious of all facts would not yet be accepted. 
What, then, can we look for in the teaching of a science 
which du'ectly concerns the most powerful of "vested 
rights"— which deals with rent and wages and interest, 
with taxes and tariffs, with privileges and franchises and 
subsidies, with currencies and land-tenures and public 
debts, with the ideas on which trade-unions are based and 
the pleas by which combinations of capitahsts are de- 
fended ? Economic truth, under existing conditions, has 
not merel}'' to overcome the inertia of indolence or habit ; 
it is in its very nature subject to suppressions and distor- 
tions from the influence of the most powerful and vigilant 
interests. It has not merely to make its way ; it must con- 
stantly stand on guard. It cannot safely be trusted to any 
selected body of men, for the same reasons that the power 
of making laws and administering public affairs cannot be 
so trusted. 



xxxiv GENERAL INTRODUCTION. 

It is especially true to-day that all large political ques- 
tions are at bottom economic questions. There is thus in- 
troduced into the study of political economy the same 
disturbing element that setting men by the ears over the 
study of theology has written in blood a long page in the 
world's history, and that at one time, at least, so affected 
even the study of astronomy as to prevent the authori- 
tative recognition of the earth's movement around the 
sun long after its demonstration. The organization of 
political parties, the pride of place and power that they 
arouse and the strong prejudices they kindle, are always 
inimical to the search for truth and to the acceptance of 
truth. 

And while colleges and universities and similar institu- 
tions, though ostensibly organized for careful investigation 
and the honest promulgation of truth, are not and cannot 
be exempt from the influences that distm'b the study of 
political economy, they are especially precluded under 
present conditions from faithful and adequate treatment 
of that science. For in the present social conditions of 
the civilized world nothing is clearer than that there is 
some deep and wide-spread wrong in the distribution, if 
not in the production, of wealth. This it is the ofSce of 
political economy to disclose, and a really faithful and 
honest explication of the science must disclose it. 

But no matter what that injustice may be, colleges and 
universities, as at present constituted, are by the very law 
of their being precluded from discovering or reveahng it. 
For no matter what be the nature of this injustice, the 
wealthy class must, relatively at least, profit by it, and this 
is the class whose views and wishes dominate in colleges 
and universities. As, while slavery was yet strong, we 
might have looked in vain to the colleges and universities 
and accredited organs of education and opinion in our 
Southern States, and indeed for that matter in the North, 



GENERAL INTRODUCTION. xxxv 

for any admission of its injustice, so under present condi- 
tions must we look in vain to such sources for any faithful 
treatment of political economy. Whoever accepts from 
them a chair of political economy must do so under the 
implied stipulation that he shall not really find what it is 
his professional business to look for.* 

In these extraneous difficulties, and not in any difficulty 
inherent in political economy itself, Hes the reason why, 
to-day, after aU the effort that since Adam Smith wrote has 
been devoted to its investigation, or presumed investiga- 
tion, he who would really know what it teaches can find 
no consistent body of undisputed doctrine that he may 
safely accept ; and can turn to the colleges and universities 
only with the certainty that, wherever else he may find the 
truth, he cannot find it there. 

Yet, if political economy be the one science that cannot 
safely be left to specialists, the one science of which it is 
needful for all to know something, it is also the science 
which the ordinary man may most easily study. It re- 
quires no tools, no apparatus, no special learning. The 
phenomena which it investigates need not be sought for 
in laboratories or libraries ; they lie about us, and are con- 
stantly thrust upon us. The principles on which it builds 
are truths of which we all are conscious, and on which in 
every-day matters we constantly base our reasoning and 
our actions. And its processes, which consist mainly in 
analysis, require only care in distinguishing what is essen- 
tial from what is merely accidental. 

In proposing to my readers to go with me in an attempt 
to work out the main principles of political economy, I am 
not asking them to think of matters they have never 
thought of before, but merely to think of them in a careful 

* On this subject, Adam Smith's opinion of colleges and universi- 
ties (Article IL, Part III., Chapter I., Book V., "Wealth of Nations") 
may still be read with much advantage. 



xxxvi GENEEAL INTEODUCTION. 

and systematic way. For we all have some sort of political 
economy. Men may honestly confess an ignorance of 
astronomy, of chemistry, of geology, of philology, and 
really feel their ignorance. But few men honestly confess 
an ignorance of political economy. Though they may 
admit or even proclaim ignorance, they do not really 
feel it. There are many who say that they know nothing 
of pohtical economy— many indeed who do not know what 
the term means. Yet these very men hold at the same 
time and with the utmost confidence opinions upon matters 
that belong to political economy, such as the causes which 
affect wages and prices and profits, the effects of tariffs, 
the influence of labor-saving machinery, the function and 
proper substance of money, the reason of " hard times " or 
" good times," and so on. For men living in society, which 
is the natural way for men to live, must have some sort of 
politico-economic theories— good or bad, right or wrong. 
The way to make sure that these theories are correct, or 
if they are not correct, to supplant them by true theories, 
is by such systematic and careful investigation as in this 
work I propose. 

But to such an investigation there is one thing so neces- 
sary, one thing of such primary and constant importance, 
that I cannot too soon and too strongly urge it upon the 
reader. It is, that in attempting the study of political 
economy we should first of all, and at every step, make 
sure of the meaning of the words that we use as its terms, 
so that when we use them they shall always have for us 
the same meaning. 

Words are the signs or tokens by which in speech or 
writing we communicate our thoughts to one another. It 
is only as we attach a common meaning to words that we 
can communicate with one another by speech. And to 
understand one another with precision, it is necessary that 



GENEEAL INTRODUCTION. xxxvii 

each attach precisely the same meaning to the same word. 
Thus, two men may look on the ocean from the same place, 
and one honestly insist that there are three ships in sight, 
while the other as honestly insists that there are only two, 
if the one uses the word ship in its general meaning of 
navigable vessel, and the other uses it in its technical 
meaning of a vessel carrying three square-rigged masts. 
Such use of words in somewhat different senses is pecu- 
liarly dangerous in philosophic discussion. 

But words are more than the means by which we com- 
municate our thoughts. They are also signs or tokens in 
which we ourselves think— the labels of the thought- 
drawers or pigeonholes in which we stow away the various 
ideas that we often mentally deal with by label. Thus, we 
cannot think with precision unless in our own minds 
we use words with precision. Failure to do this is a 
great cause of the generation and persistence of economic 
fallacies. 

In all studies it is important that we should attach defi- 
nite meanings to the terms we use. But this is especially 
important in political economy. For in other studies most 
of the words used as terms are peculiar to that study. The 
terms used in chemistry, for instance, are used only in 
chemistry. This makes the study of chemistry harder in 
beginning, for the student has to familiarize himself with 
new words. But it avoids subsequent difficulties, for these 
words being used only in chemistry, theii' meaning is not 
likely to be warped by other use from the one definite 
sense they properly bear in chemistry. 

Now the terms used in political economy are not words 
reserved to it. They are words in every-day use, which 
the necessities of daily life constantly requu-e us to give to, 
and accept for, a different than the economic meaning. 
In studying political economy, in thinking out any of its 



xxxviii GENERAL INTRODUCTION. 

problems, it is absolutely necessary to give to such, terms 
as wealth, value, capital, land, labor, rent, interest, wages, 
money, and so on, a precise meaning; and to use them 
only in this— a meaning which always differs, and in some 
cases differs widely, from the common meaning. But not 
only have we aU been accustomed in the first place to use 
these words in their common meanings ; but even after we 
have given them as politico-economic terms a definite 
meaning, we must, in ordinary talk and reading continue 
to use and accept them in their ordinary sense. 

Hence arises in pohtical economy a liability to confusion 
in thought from lack of definiteness in the use of terms. 
The careless as to terms cannot take a step without falling 
into this confusion, and even the usually careful are liable 
to fall into confusion if at any moment they relax their 
vigilance. The most eminent writers on political economy 
have given examples of this, confusing themselves as well 
as their readers by the vague use of a term. To guard 
against this danger it is necessary to be careful in begin- 
ning, and continuously to be careful. I shall therefore in 
this work try to define each term as it arises, and there- 
after, when using it as an economic term, try to use it in 
that precise sense, and in no other. 

To define a word is to mark off what it includes from 
what it does not include— to make it in our minds, as it 
were, clear and sharp on its edges— so that it will always 
stand for the same thing or things, not at one time mean 
more and at another time less. 

Thus, beginning at the beginnings, let us consider the 
nature and scope of political economy, that we may see its 
origin and meaning, what it includes and what it does not 
include. If in this I ask the reader to go with me deeper 
than wi'iters on political economy usually do, let him not 
think me wandering from the subject. He who would 
build a towering structure of brick and stone, that in stress 



GENERAL INTRODUCTION. xxxix 

and strain will stand firm and plumb, digs for its founda- 
tion to solid rock. 

Should we grudge such pains in laying the foundations 
of a great science, on which in its superstructure so much 
must rest ? 

In nothing more than in philosophy is it wise that we 
should be '' like a man which built an house, and digged 
deep, and laid the foundation on a rock." 



BOOK I. 



THE MEANING OF POLITICAL ECONOMY 



Though but an atom midst immensity, 

Still I am something, fashioned by Thy hand ! 
I hold a middle rank 'twixt heaven and earth— 

On the last verge of mortal being stand 
Close to the realms where angels have their birth, 

Just on the boundaries of the spirit-land ! 
The chain of being is complete in me— 

In me is matter's last gradation lost, 
And the next step is spirit— Deity ! 

I can command the lightning, and am dust ! 

—Bowring's translation of Derzhavin. 



CONTENTS OF BOOK I. 



THE MEANING OF POLITICAL ECONOMY. 



PAGE 

INTKODUCTION TO BOOK 1 7 

CHAPTER I. 
THE THREE FACTORS OF THE WORLD. 

SHOWING THE CONSTITUENTS OF ALL WE PERCEIVE. 

Meaning of factor ; and of philosophy ; and of the world — What 
we call spirit — What we call matter — What we call energy — 
Though these three may be at bottom one, we must separate 
them in thought — Priority of spirit 9 

CHAPTER II, 
MAN, HIS PLACE AND POWERS. 

SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALITIES 
THAT ENABLE US TO EXTEND OUR KNOWLEDGE OF IT AND OUR 
POWERS ON IT. 

Man's earliest knowledge of his habitat — How that knowledge 
gi'ows, and what civilized men now know of it — The essential 
distinction between man and other animals — In this lies his 
power of producing and improving 11 

CHAPTER III. 
HOW MAN'S POWERS ARE EXTENDED. 

SHOWING THAT THEIR USE OF REASON WELDS MEN INTO 
THE SOCIAL ORGANISM OR ECONOMIC BODY. 

Extensions of man's powers in civilization — Due not to improve- 
ment in the individual but in the society — Hobbes's "Levia- 
than " — The Greater Leviathan — This capacity for good also 

capacity for evil 19 

3 



4 CONTENTS OF BOOK I. 

CHAPTER IV. 
CIVILIZATION— WHAT IT MEANS. 

PAGE 
SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OP 
MEN INTO THE SOCIAL ORGANISM OR ECONOMIC BODT. 

Vagueness as to what civilization is — Guizot quoted — Deriva- 
tion and original meaning — Civilization and the State — Why 
a word referring to the precedent and greater has been taken 
from one referring to the subsequent and lesser . . .24 

CHAPTER V. 
THE ORIGIN AND GENESIS OF CIVILIZATION. 

SHOWING THE NATURE OF REASON ; AND HOW IT IMPELS TO 
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS. 

Reason the power of tracing causal relations — Analysis and syn- 
thesis — Likeness and unlikeness between man and other ani- 
mals — Powers that the apprehension of causal relations gives — 
Moral connotations of civilization — But begins with and in- 
creases through exchange — Civilization relative, and exists in 
the spiritual 29 

CHAPTER VI. 

OF KNOWLEDGE AND THE GROWTH OF KNOWLEDGE. 

SHOWING THAT THE GROWTH OF BGSTOWLEDGE IS BY COOPER- 
ATION, AND THAT IT INHERES IN THE SOCIETY. 

Civilization implies greater knowledge — This gain comes from 
cooperation — The incommunicable knowing called skUl — The 
communicable knowing usually called knowledge — The rela- 
tion of systematized knowledge to the means of storing know- 
ledge, to skill and to the economic body — Illustration from as- 
tronomy 39 

CHAPTER VII. 

OF SEQUENCE, CONSEQUENCE AND LAWS OF NATURE. 

SHOWING THE PROPER MEANING OF SEQUENCE AND OF CON- 
SEQUENCE, AND WHY WE SPEAK OF LAWS OF NATURE. 

Coexistence and succession — Sequence and consequence — Causes 
in series ; names for them — Our direct knowledge is of spirit 
— Simplest perception of causal relation — Extensions of this — 
The causal search unsatisfied till it reaches spirit — And finds 
or assumes intent — Early evidences of this — ^Why we must 
assume a superior spirit — Evidences of intent — The word 
nature and its implication of will or spirit — The word law — 
The term " law of nature " 44 



CONTENTS OF BOOK I. 6 

CHAPTER VIII. 
OF THE KNOWLEDGE PEOPERLY CALLED SCIENCE. 

PAGE 

SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OF NATURE, 
AND THAT IN THE CUERENT POLITICAL ECONOMY THIS HAS 
BEEN FORGOTTEN. 

Proper meaning of science — It investigates laws of nature, not 
laws of man — Distinction between the two — Their confusion 
in the current political economy — Mason and Lalor's "Primer 
of Political Economy" quoted — Absurdity of this confusion — 
Turgot on the cause of such confusions 58 

CHAPTER IX. 
THE ECONOMY CALLED POLITICAL ECONOMY. 

SHOWING THE MEANING, UNITS AND SCOPE OF POLITICAL 
ECONOMY. 

The word economy — The word political — Origin of the term 
"political economy" and its confusions — It is not concerned 
with the body politic, but with the body economic — Its units, 
and the system or arrangement of which it treats — Its scope . 65 

CHAPTER X. 
THE ELEMENTS OF POLITICAL ECONOMY. 

SHOWING HOW POLITICAL ECONOMY SHOULD PROCEED AND 
WHAT RELATIONS IT SEEKS TO DISCOVER. 

How to understand a complex system — It is the purpose of such 
a system that political economy seeks to discover — These 
laws, natural laws of human nature — The two elements rec- 
ognized by political economy — These distinguished only by 
reason — Human will affects the material world only through 
laws of nature — It is the active factor in all with which polit- 
ical economy deals 74 

CHAPTER XI. 
OF DESIRES AND SATISFACTIONS. 

SHOWING THE WIDTH AND IMPORTANCE OF THE FIELD OF 
POLITICAL ECONOMY. 

Action springs from desire and seeks satisfaction — Order of de- 
sires — Wants or needs — Subjective and objective desires — 
Material and immaterial desires — The hierarchy of life and 
of desires 81 



6 CONTENTS OF BOOK I. 

CHAPTER XII. 
THE FUNDAMENTAL LAW OP POLITICAL ECONOMY. 

PAGE 

SHOWING THAT THE LAW PROM WHICH POLITICAL ECONOMY PRO- 
CEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES WITH 
THE LEAST EXERTION. 

Exertion followed by weariness — The fact that men seek to sat- 
isfy their desires with the least exertion — Meaning and ana- 
logue — Exemplified in trivial things — Is a law of nature and 
the fundamental law of political economy — Substitution of 
selfishness for this principle — Buckle quoted — Political econ- 
omy requires no such assumption — The necessity of labor not 
a curse . 86 

CHAPTER XIII. 
METHODS OF POLITICAL ECONOMY. 

SHOWING THE NATURE OF THE METHODS OP INVESTIGATION 
THAT MAY BE USED IN POLITICAL ECONOMY. 

Deductive and inductive schools — "New American Cyclopedia" 
quoted — Triumph of the inductionists — The method of in- 
duction and the method of deduction — Method of hypothesis. 
Bacon's relation to induction — Real error of the deduction- 
ists and the mistake of the inductionists — Lalor's Cyclopedia 
quoted — Result of the triumph of the inductionists — A true 
science of political economy must follow the deductive method 
— Davis's ' ' Elements of Inductive Logic " quoted — Double as- 
surance of the real postulate of political economy — Method of 
mental or imaginative experiment 92 

CHAPTER XIV. 
POLITICAL ECONOMY AS SCIENCE AND AS ART. 

SHOWING THAT POLITICAL ECONOMY IS PROPERLY A SCIENCE, 
AND THE MEANING IT SHOULD HAVE IP SPOKEN OP AS ART. 

Science and art — There must be a science of political economy, 
but no proper art — What must be the aim of an art of politi- 
cal economy — White art and black art — Course of further 
investigation 101 



INTEODUCTION TO BOOK I. 

THE earliest, and as I think sufficient, definition of 
Political Economy, is, the science that treats of the 
nature of wealth, and of the laws of its production and 
distribution. But as this definition seems never to have 
been fully understood and adhered to by the accepted 
teachers of political economy, and has during late years 
been abandoned by those who occupy the position of of- 
ficial teachers in all our leading colleges and universities, 
let us, beginning at the beginnings, endeavor to see for 
ourselves just what political economy is. 



CHAPTER I. 
THE THREE FACTORS OF THE WORLD. 

SHOWING THE CONSTITUENTS OF ALL WE PERCEIVE. 

Meaning of factor ; and of philosophy ; and of the world— What we 
call spirit— What we call matter— What we call energy— Though 
these three may he at bottom one, we must separate them in 
thought— Priority of spirit. 

THE word factor, in commercial use, means one who 
acts as agent for anotlier. In mathematical use, it 
means one of the quantities which multiplied together form 
a product. Hence in philosophy, which may be defined as 
the search for the nature and relations of things, the word 
factor affords a fit term for the elements which bring 
about a result, or the categories into which analysis enables 
us to classify these elements. 

In the world— I use the term in its philosophic sense of 
the aggregate or system of things of which we are cog- 
nizant and of which we ourselves are part — we are enabled 
by analysis to distinguish three elements or factors : 

1. That which feels, perceives, thinks, wills; which to 
distinguish, we caU mind or soul or spirit. 

2. That which has a mass or weight, and extension or 
form; which to distinguish, we call matter. 

3. That which acting on matter produces movement; 
which to distinguish, we call motion or force or energy. 

9 



10 THE MEANINa OF POLITICAL ECONOMY. Book I. 

We cannot, in truth, dii^ectly recognize energy apart 
from matter; nor matter without some manifestation of 
energy ; nor mind or spirit uncon joined with matter and 
motion. For though our own consciousness may testify 
to our own essentially spiritual nature, or even at times to 
what we take to be direct evidence of pure spiritual exis- 
tence, yet consciousness itself begins with us only after 
bodOy life has already begun, and memory by which alone 
we can recall past consciousness is later still in appearing. 
It may be that what we call matter is but a form of energy ; 
and it may perhaps be that what we call energy is but a 
manifestation of what we call mind or soul or spirit ; and 
some have even held that from matter and its inherent 
powers all else originates. Yet though they may not be 
in fact separable by us, and though it may be that at 
bottom they are one, we are compelled in thought to dis- 
tinguish these three as independent, separable elements, 
which in their actions and reactions make up the world as 
it is presented to our perception. 

Of these from our standpoint, that which feels, perceives, 
thinks, wills, comes first in order of priority, for it is this 
which is first in our own consciousness, and it is only 
through this that we have consciousness of any other exis- 
tence. In this, as our own consciousness testifies, is the 
initiative of all our own motions and movements, so far as 
consciousness and memory shed light ; and in all cases in 
which we can trace the genesis of anything to its begin- 
ning we find that beginning in thought and will. So clear, 
so indisputable is the priority of this spiritual element that 
wherever and whenever men have sought to account for 
the origin of the world they have always been driven to 
assume a great spirit or God. For though there be athe- 
istic theories, they always avoid the question of origin, 
and assume the world always to have been. 



CHAPTER II. 
MAN, HIS PLACE AND POWERS. 

SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALI- 
TIES THAT ENABLE US TO EXTEND OUR KNOWLEDGE OP IT 
AND OUR POWERS ON IT. 

Man's earliest knowledge of liis habitat— How that knowledge grows, 
and what civilized men now know of it — The essential distinc- 
tion between man and other animals— In this lies his power of 
producing and improving. 

WE awake to consciousness to find ourselves, clothed in 
flesh, and in company with other like beings, resting 
on what seems to us a plane surface. Above us, when the 
clouds do not conceal them, the sun shines by day and the 
moon and stars by night. Of what this place is, and of 
our relations to it, the first men probably knew little more 
than is presented to us in direct consciousness, little more 
in fact than the animals know ; and, individually, we our- 
selves could know little more. But the observations and 
reflections of many succeeding men, garnered and system- 
atized, enable us of the modern ciAdlization to know, and 
with the eyes of the mind almost to see, things to which the 
senses untaught by reason are blind. 

By the light of this gathered knowledge we behold our- 
selves, the constantly changing tenants of the exterior of 
a revolving sphere, circling around a larger and luminous 
sphere, the sun, and beset on all sides by depths of space, 
to which we can neither find nor conceive of limits. 

11 



12 THE MEANlNa OF POLITICAL ECONOMY. Booh I. 

Through this immeasurable space revolve myriads of lu- 
minous bodies of the nature of our sun, surrounded, it is 
confidently inferred from the fact that we know it to be 
the case with our sun, by lesser, non-luminous bodies that 
have in them their centers of revolution. 

Our sun, but one, and far from one of the largest, of 
countless similar orbs, is the center of light and heat and 
revolution to eight principal satellites (having in then- 
turn satellites of their own), as well as to an indefinite 
number of more minute bodies known to us as asteroids 
and of more erratic bodies called comets. Of the princi- 
pal satellites of the sun, the third in point of distance from 
it, and the fourth in point of size, is om- earth. It is in 
constant movement around the sun, and in constant revo- 
lution on its own axis, while its satellite, the moon, also 
revolving on its own axis, is in constant movement around 
it. The sun itself, revolving too on its own axis, is, with 
all its attendant bodies, in constant movement around 
some, probably moving, point in the universe which 
astronomers have not yet been able to determine. 

Thus we find ourselves, on the surface of a globe seem- 
ingly fixed, but really in constant motion of so many dif- 
ferent kinds that it would be impossible with our present 
knowledge to make a diagram indicating its real movement 
through space at any point— a globe large to us, yet only 
as a grain of sand on the sea-shore compared with the 
bodies and spaces of the universe of which it is a part. 
We find ourselves on the surface of this ceaselessly mov- 
ing globe, as passengers, brought there in utter insensibil- 
ity, they know not how or whence, might find themselves 
on the deck of a ship, moving they know not where , and 
who see in the distance similar ships, whether tenanted or 
how tenanted they can only infer and guess. The im- 
measurably great lies beyond us, and about and beneath 



Chap. II. MAN, HIS PLACE AND POWEES. 13 

US the immeasurably small. The microscope reveals in- 
finitudes no less startling to our minds than does the tele- 
scope. 

Here we are, depth upon depth about us, confined to the 
bottom of that sea of air which envelops the surface of this 
moving globe. In it we live and breathe and are con- 
stantly immersed. Were our lungs to cease taking in and 
pumping out this air, or our bodies relieved of its pressure, 
we should die. 

Small as our globe seems in the light of astronomy, it 
is not really of the whole globe that we are tenants, but 
only of a part of its surface. Above this mean surface, 
men have found it possible only with the utmost effort and 
fortitude to ascend something less than seven miles ; below 
it our deepest mining shafts do not pierce a mile. Thus 
the extreme limits in depth and height to which man may 
occasionally adventure, though not permanently live, are 
•hardly eight miles. In round numbers the globe is 8000 
miles in diameter. Thus the skin of the thinnest-skinned 
apple gives no idea of the relative thinness of the zone of 
perpendicular distance to which man is confined. And 
three fourths of the surface of the globe at its junction 
with the air is covered by water, on which, though man 
may pass, he cannot dwell; while considerable parts of 
what remain are made inaccessible by ice. Like a bridge 
of hair is the line of temperature that we must keep. In- 
vestigators tell us of the existence of temperatures thou- 
sands of degrees above zero and thousands of degrees below 
zero. But man's body must maintain the constant level 
of a fraction over 98 degrees above zero. A rise or fall 
of seven degrees either way from this level and he dies. 
With the permanent rise or fall of a few more degrees in 
the mean temperature of the surface of the globe it would 
become uninhabitable by us. 



14 THE MEANING OF POLITICAL ECONOMY. Booh I. 

Aud while all about us, even what seems firmest, is in 
constant change and motion, so is it with ourselves. These 
bodies of ours are in reality like the flame of a gas-burner, 
which has continuous and defined form, but only as the 
manifestation of changes in a stream of succeeding parti- 
cles, and which disappears the moment that stream is cut 
off. What there is real and distinctive in us is that to 
which we may give a name but cannot explain nor easily 
define — that which gives to changing matter and passing 
motion the phase and form of man. But our bodies and 
our physical powers themselves, like the form and power 
of the gas-flame, are only passing manifestations of that 
indestructible matter and eternally pulsing energy of which 
the universe so far as it is tangible to us is made up. Stop 
the air that every instant is drawn through our lungs and 
we cease to live. Stop the food and diink that serve to 
us the same purpose as coal and water to the steam-engine, 
and, as certainly, if more slowly, the same result follows. 

In all this, man resembles the other animals that with 
him tenant the superficies of the same earth. Physically 
he is merely such an animal, in form and structure and 
primary needs closely allied to the mammalia, with whose 
species he is zoologically classified. Were man only an 
animal he would be but an inferior animal. Nature has 
not given him the powers and weapons which enable other 
animals readily to secure their food. Nor yet has she 
given him the covering which protects them. Had he like 
them no power of providing himself with artificial clothing, 
man could not exist in many of the regions he now in- 
habits. He could live only in the most genial and equable 
parts of the globe. 

But man is more than an animal. Though in physical 
equipment he may in nothing snrj)ass, and in some things 
fall below other animals, in mental equipment he is so 
vastly superior as to take him out of their class, and to 



CJia/p. II. MAN, HIS PLACE AND POWERS. 15 

make him the lord and master of them all— to make him 
veritably, of aU that we may see, " the roof and crown of 
things." And what more clearly perhaps than all else in- 
dicates the deep gulf which separates him from all other 
animals is that he alone of all animals is the producer, or 
bringer forth, and in that sense a maker. In this is a 
difference which renders the distinction between the high- 
est animal and the lowest man one not of degree but of 
kind, and which, linked with the animals though he be, 
justifies the declaration of the Hebrew Scripture, that man 
is created in the likeness of the AU-Maker. 

Consider this distinction : We know of no race of men 
so low that they do not raise fruits or vegetables, or 
domesticate and breed animals; that do not cook food; 
that do not fashion weapons ; that do not construct habita- 
tions ; that do not make for themselves garments ; that do 
not adorn themselves or their belongings with ornamenta- 
tion; that do not show at least the rude beginnings of 
di-awing and painting and sculpture and music. In all the 
tribes of animated nature below man there is not the 
slightest indication of the power thus shown. No animal 
save man ever kindled a fire or cooked a meal, or made a 
tool or fashioned a weapon. 

It is true that the squirrel hides nuts ; that birds build 
nests ; that the beaver dams streams ; that bees construct 
combs, in which they store the honey they extract from 
flowers ; that spiders weave webs ; that one species of ants 
are said to milk insects of another kind. All this is true, 
just as it is also true that there are bii'ds whose melody 
far surpasses the best music of the savage, and that on 
tribes below man nature lavishes an adornment of attire 
that in taste as well as brilliancy surpasses the meretricious 
adornments of primitive man. 

But in aU this there is nothing akin to the faculties 
which in these things man displays. What man does, he 



16 THE MEANING OF POLITICAL ECONOMY. BooTc I. 

does by taking thought, by consciously adjusting means 
to ends. He does it by adapting and contriving and ex- 
perimenting and copying ; by effort after effort and trial 
after trial. What he does, and his ways of doing it, vary 
with the individual, with social development, with time and 
place and surroundings, and with what he sees others do. 

But the squirrel hides its nuts; the birds after their 
orders build their nests, and in due time force their young 
to fly ; the beaver constructs its dam ; the bees store their 
honey; the spiders weave, and the ants do the work of 
their societies, without taking thought, without toilsomely 
scheming for the adapting of means to ends, without 
experimenting or copying or improving. What they do of 
such things, they do not as originators who have discovered 
how to do it ; nor yet as learners or imitators or copyists. 
They do it, first as weU as last, unfalteringly and unalter- 
ingly, forgetting nothing and improving in nothing. They 
do it, not by reason but by instinct ; by an impulse inhering 
in their nature which prompts them without perplexity or 
trial on their part to go so far, but gives them no power 
to go farther. They do it as the bird sings or the dog- 
barks, as the hen sits on her eggs or the chick picks its 
way from the shell to scratch the ground. 

Nature provides for aU living things beneath man by 
implanting in them blind, strong impulses which at proper 
times and seasons prompt them to do what it is necessary 
they should do. But to man she grants only such impel- 
lings of instinct as that which prompts the mother to press 
the new-born babe to her breast and the babe to suckle. 
With exceptions such as these, she withdraws from man 
her guiding power and leaves him to himself. For in him 
a higher power has arisen and looks out on the world— a 
power that separates him from the brute as clearlj^ and as 
widely as the brute is separated from the clod ; a power 
that has in it the potency of producing, of making, of 



Chajp. 11. MAN, HIS PLACE AND POWERS. 17 

causing things to be ; a power that seeks to look back into 
a past ere the globe was, and to peer into a futui-e when 
it will cease to exist ; a power that looks on Nature's show 
with cui'iosity like that with which an apprentice might 
scan a master's work, and will ask why tides run and 
winds blow, and how suns and stars have been put to- 
gether ; a power that in its beginnings lacks the certainty 
and promptness of instinct, but which, though infinitely 
lower in degree, must yet in some sort be akin to that from 
which all things proceed. 

As this power, which we call reason, rises in man, na- 
ture withdraws the light of instinct and leaves him to his 
own devices— to rise or fall, to soar above the brute or to 
sink lower. For as the Hebrew Scriptures have phrased 
it, his eyes are opened and before him are good and evil. 
The ability to fall, no less than the ability to rise— the very 
failures and mistakes and perversities of man— show his 
place and powers. There is among the brutes no drunk- 
enness, no unnatural vice, no waste of effort in accom- 
plishing injurious results, no wanton slaughter of their 
own kind, no want amid plenty. We may conceive of 
beings in the form of man, who, like these animals, should 
be ruled bj^ such clear and strong instincts that among 
them also there would be no liability to such perversions. 
Yet such beings would not be men. They would lack the 
essential character and highest powers of man. Fitted 
perfectly to their environment they might be happy in a 
way. But it would be as the full-fed hog is happy. The 
pleasure of making, the joy of overcoming, the glory of 
rising, how could they exist for such beings ? That man 
is not fitted for his environment shows his higher quality. 
In him is that which aspires — and still aspires. 

Endowed with reason, and deprived, or all but deprived, 
of instinct, man differs from other animals in being the 
producer. Like them, for instance, he requires food. But 



18 THE MEANING OF POLITICAL ECONOMY. Book I. 

while the animals get their food by taking what they find, 
and are thus limited by what they find already in exis- 
tence, man has the power of getting his food by bringing 
it into existence. He is thus enabled to obtain food in 
greater variety and in larger quantity. The amount of 
grass limits the number of wild cattle, the amount of their 
prey limits the number of the carnivora ; but man causes 
grasses and grains and fruits to grow where they did not 
grow before ; he breeds animals on which he feeds. And 
so it is with the fulfilment of all his wants ; the satisfaction 
of all his desires. By the use of his animal powers, man 
can cover perhaps as much ground in a day as can a horse 
or a dog; he can cross perhaps about as wide a stream. 
But by virtue of the power that makes him the producer 
he is already spanning continents and oceans with a speed, 
a certainty and an ease that not even the birds of most 
powerful wing and swiftest flight can rival. 



CHAPTER III. 
HOW MAN'S POWERS ARE EXTENDED. 

SHOWING THAT THEIR USE OF REASON WELDS MEN INTO 
THE SOCIAL ORGANISM OR ECONOMIC BODY. 

Extensions of man's powers in civilization— Due not to improve- 
ment in the individual but in the society— Hobbes's "Leviathan" 
—The Greater Leviathan— This capacity for good also capacity 
for evil. 

'AN, as we have any knowledge of him, either in the 
present or in the past, is always man ; differing from 
other animals in the same way, feeling the same essential 
needs, moved by the same essential desires, and possessed 
of the same essential powers. 

Yet between man in the lowest savagery and man in 
the highest civilization how vast the difference in the 
ability of satisfying these needs and desires by the use of 
these powers. In food, in raiment, in shelter; in tools 
and weapons ; in ease of movement and of transportation ; 
in medicine and surgery ; in music and the representative 
arts ; in the width of his horizon ; in the extent and pre- 
cision of the knowledge at his service— the man who is 
free to the advantages of the civilization of to-day is as 
a being of higher order compared to the man who was 
clothed in skins or leaves, whose habitation was a cave or 
rude hut, whose best tool a chipped flint, whose boat a 
hollowed log, whose weapons the bow and arrows, and 

19 



20 THE MEANING OF POLITICAL ECONOMY. Book I. 

whose horizon was bounded, as to the past, by tribal tra- 
dition, and as to the present by the mountains or sea-shore 
of his immediate home and the arched dome which seemed 
to him to shut it in. 

But if we analyze the way in which these extensions of 
man's power of getting and making and knowing and 
doing are gained, we shall see that they come, not from 
changes in the individual man, but from the union of 
individual powers. Consider one of those steamships now 
crossing the Atlantic at a rate of over five hundred miles 
a day. Consider the cooperation of men in gathering 
knowledge, in acquiring skill, in bringing together mate- 
rials, in fashioning and managing the whole great struc- 
ture ; consider the docks, the storehouses, the branching 
channels of trade, the correlation of desires reaching over 
Europe and America and extending to the very ends of 
the earth, which the regular crossing of the ocean by such 
a steamship involves. Without this cooperation such a 
steamship would not be possible. 

There is nothing whatever to show that the men who 
to-day build and navigate and use such ships are one whit 
superior in any physical or mental quality to their ances- 
tors, whose best vessel was a coracle of wicker and hide. 
The enormous improvement which these ships show is not 
an improvement of human nature ; it is an improvement 
of society— it is due to a wider, fuller union of individual 
efforts in the accomplishment of common ends. 

To consider in like manner any one of the many and 
great advances which civilized man in our time has made 
over the power of the savage, is to see that it has been 
gained, and could only have been gained, by the widening 
cooperation of individual effort. 

The powers of the individual man do not indeed reach 
their full limit when maturity is once attained, as do those 
of the animal ; but, the highest of them at least, are capable 



Chap. III. HOW MAN'S POWERS ARE EXTENDED. 21 

of increasing development up to the physical decay that 
comes with age, if not up to the verge of the grave. Yet, 
at best, man's individual powers are small and his life is 
short. What advances would be possible if men were 
isolated from each other and one generation separated 
from the next as are the generations of the seventeen-year 
locusts? The little such individuals might gain during 
their own lives would be lost with them. Each generation 
would have to begin from the starting-place of its prede- 
cessor. 

But man is more than an individual. He is also a social 
animal, formed and adapted to live and to cooperate with 
his fellows. It is in this line of social development that 
the great increase of man's knowledge and powers takes 
place. 

The slowness with which we attain the ability to care 
for ourselves and the qualities incident to our higher gifts 
involve an overlapping of individuals that continues and 
extends the family relation beyond the hmits which obtain 
among other mammalia. And, beyond this relation, com- 
mon needs, similar perceptions and like desires, acting 
among creatures endowed with reason and developing 
speech, lead to a cooperation of effort that even in its 
crudest forms gives to man powers that place him far 
above the beasts and that tends to weld individual men 
into a social body, a larger entity, which has a life and 
character of its own, and continues its existence while its 
components change, just as the life and characteristics of 
our bodily frame continue, though the atoms of which it 
is composed are constantly passing away from it and as 
constantly being replaced. 

It is in this social body, this larger entity, of which in- 
dividuals are the atoms, that the extensions of human 
power which mark the advance of civilization are secured. 
The rise of civilization is the growth of this cooperation 



22 THE MEANING OF POLITICAL ECONOMY. Boolcl. 

and the increase of the body of knowledge thus obtained 
and garnered. 

Perhaps I can better point out what I mean by an illus- 
tration : 

The famous treatise in which the English philosopher 
Hobbes, during the revolt against the tyranny of the 
Stuarts in the seventeenth century, sought to giv€ the 
sanction of reason to the doctrine of the absolute authority 
of kings, is entitled " Leviathan." It thus begins : 

Nature, the art whereby God liath made and governs the world, is 
by the art of man, as in many other things, so in this also imitated, 
that it can make an artificial animal. . . . For by art is created that 
great Leviathan called a commonwealth or state, in Latin eivitas, 
which is but an artificial man ; though of greater stature and strength 
than the natural, for whose protection and defense it was intended ; 
and in which the sovereignty is an artificial soul, as giving life and 
motion to the whole body ; the magistrates and other officers of judi- 
cature and execution, artificial joints ; reward and punishment, by 
which fastened to the seat of the sovereignty every joint and mem- 
ber is moved to perform his duty, are the nerves, that do the same 
in the body natural ; the wealth and riches of all the particular mem- 
bers, are the strength ; salus populi, the people's safety, its business ; 
coimselors by whom all things needful for it to know are suggested 
unto it, are the memorj^ ; equity and laws, an artificial reason and 
will ; concord, health ; sedition, sickness ; and civil war, death. 
Lastly, the pacts and covenants, by which the parts of this body 
politic were at first made, set together, and united, resemble that 
fiat, or the "Let us make man," pronounced by God in the creation. 

Without stopping now to comment further on Hobbes's 
suggestive analogy, there is, it seems to me, in the system 
or arrangement into which men are brought in social life, 
by the effort to satisfy their material desires— an integra- 
tion which goes on as civilization advances— something 
which even more strongly and more clearly suggests the 
idea of a gigantic man, formed by the union of individual 
men, than any merely political integration. 

This Greater Leviathan is to the political structui'e or 
conscious commonwealth what the unconscious functions 



Chap. III. now MAN'S POWEES AEE EXTENDED. 23 

of the body are to the conscious activities. It is not made 
by pact and covenant, it grows ; as the tree grows, as the 
man himself grows, by virtue of natural laws inherent in 
human nature and in the constitution of things ; and the 
laws which it in turn obeys, though their manifestations 
may be retarded or prevented by political action are them- 
selves utterly independent of it, and take no note whatever 
of political divisions. 

It is this natural system or arrangement, this adjust- 
ment of means to ends, of the parts to the whole and the 
whole to the parts, in the satisfaction of the material de- 
sires of men living in society, which, in the same sense as 
that in which we speak of the economy of the solar system, 
is the economy of human society, or what in Enghsh we 
call political economy. It is as human units, individuals 
or families, take their place as integers of this higher man, 
this Greater Leviathan, that what we call civilization 
begins and advances. 

But in this as in other things, the capacity for good is 
also capacity for evil, and prejudices, superstitions, errone- 
ous beliefs and injurious customs may in the same way be 
so perpetuated as to turn what is the greatest potency of 
advance into its greatest obstacle, and to engender degra- 
dation out of the very possibilities of elevation. And it 
is well to remember that the possibihties of degradation 
and deterioration seem as clear as the possibilities of ad- 
vance. In no race and at no place has the advance of man 
been continuous. At the present time, while European 
civilization is advancing, the majority of mankind seem 
stationary or retrogressive. And while even the lowest 
peoples of whom we have knowledge show in some things 
advances over what we infer must have been man's primi- 
tive condition, yet it is at the same time true that in other 
things they also show deteriorations, and that even the most 
highly advanced peoples seem in some things below what 
we best imagine to have been as the original state of man. 



CHAPTER IV. 
CIVILIZATION-WHAT IT MEANS. 

SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OF 
MEN INTO THE SOCIAL ORGANISM OR ECONOMIC BODY. 

Vagueness as to what civilization is— Guizot quoted— Derivation 
and original meaning — Civilization and the State — Why a word 
referring to the precedent and greater has been taken from one 
referring to the subsequent and lesser. 

THE word civilization is in common use. But it is 
used with vague and varying meanings, which refer 
to the qualities or results that we attribute to the thing, 
rather than to the thing itself the existence or possibility 
of which we thus assume. 

Sometimes our expressed or implied test of civilization 
is in the methods of industry and control of natural forces. 
Sometimes it is in the extent and diffusion of knowledge. 
Sometimes in the kindliness of manners and justice and 
benignity of laws and institutions. Sometimes it may be 
suspected that we use the word as do the Chinese when 
they class as barbarians aU. humanity outside of the " Cen- 
tral Flowery Kingdom." And there is point in the satire 
which tells how men who had lost their way in the wilder- 
ness, exclaimed at length when they reached a prison : 
" Thank God, we are at last in civilization ! " 

This difficulty in determining just what civilization is, 
does not pertain to common speech alone, but is felt by 

24 



Chap. IV. CIVILIZATION -WHAT IT MEANS. 25 

the best writers on the subject. Thus Buckle, in the two 
great volumes of the general introduction to his "History 
of Civilization in England/' which was all his untimely- 
death permitted him to complete, gives us his view of what 
civilization depends on, what influences it, what promotes 
or retards it ; but does not venture to say what civilization 
is. And thus Guizot, in his '' General History of Civiliza- 
tion in Modern Europe," says of civilization itself : 

It is so general in its nature that it can scarcely be seized ; so com- 
plicated that it can scarcely be unraveled ; so hidden as scarcely to 
be discernible. The difficulty of describing it, or recounting its his- 
tory, is apparent and acknowledged ; but its existence, its worthiness 
to be described and to be recounted, is not less certain and manifest. 

Yet, surely, it ought to be possible to fix the meaning of a 
word so common and so important ; to determine the thing 
from which the qualities we attribute to civilization pro- 
ceed. This I shall attempt, not only because I shall have 
futm'e occasion to use the word, but because of the light 
the effort may throw on the matter now in hand, the 
nature of political economy. 

The word civilization comes from the Latin dms, a 
citizen. Its original meaning is, the manner or condition 
in which men live together as citizens. Now the relations 
of the citizen to other citizens, which are in their concep- 
tion peaceable and friendly, involving mutual obligations, 
mutual rights and mutual services, spring from the rela- 
tion of each citizen to a whole of which each is an integral 
part. That whole, from membership in which proceeds 
the relationship of citizens to each other, is the body 
politic, or political community, which we name the state, 
and which, struck by the analogy between it and the 
human body, Hobbes likened to a larger and stronger man 
made up by the integration of individual men, and called 
Leviathan. 



26 THE MEANING OF POLITICAL ECONOMY. Booh I. 

Yet it is not this political relation, but a relation like 
it, that is suggested in this word civilization— a relation 
deeper, wider and closer than the relation of the citizen to 
the State, and prior to it. 

There is a relation between what we call a civilization 
and what we call a state, but in this the civilization is the 
antecedent and the state the subsequent. The appearance 
and development of the body politic, the organized state, 
the Leviathan of Hobbes, is the mark of civilization already 
in existence. Not in itself civilization, it involves and 
presupposes civilization. 

And in the same way the character of the state, the 
nature of the laws and institutions which it enacts and 
enforces, indicate the character of the underlying civiliza- 
tion. For while civilization is a general condition, and 
we speak of mankind as civilized, half civilized or uncivi- 
lized, yet we recognize individual differences in the char- 
acteristics of a civihzation, as we recognize differences in 
the characteristics of a state or in the characteristics of a 
man. We speak of ancient civilization and modern civili- 
zation ; of Asiatic civilization and European civilization ; 
of the Egyptian, the Assyrian, the Chinese, the Indian, 
the Aztec, the Peruvian, the Roman and the Greek civili- 
zations, as separate things, having such general likeness 
to each other as men have to men, but each marked by 
such individual characteristics as distinguish one man from 
other men. And whether we consider them in their grand 
divisions or in their minor divisions, the line between what 
we call civilizations is not the line of separation between 
bodies politic. The United States and Canada, or the 
United States and Great Britain, are separate bodies politic, 
yet their civilization is the same. The making of the 
Queen of Great Britain Empress of India does not substi- 
tute the English civilization for the Indian civilization in 
Bengal, nor the Indian civilization for the English civiliza- 



Chap. IV. CIVILIZATION- WHAT IT MEANS. 27 

tion in Yorkshii-e or Kent. Change in allegiance involves 
change in citizenship, but in itself involves no change in 
the civilization. Civilization is evidently a relation which 
underlies the relations of the body politic as the uncon- 
scious motions of the body underlie the conscious motions. 

Now, as the relations of the citizen proceed essentially 
from the relation of each citizen to a whole — the body pol- 
itic, or Leviathan, of which he is a part— is it not clear, 
when we consider it, that the relations of the civilized man 
proceed from his relations to what I have called the body 
economic, or G-reater Leviathan '? It is this body economic 
or body industrial, which grows up in the cooperation of 
men to supply then- wants and satisfy their desires, that 
is the real thing constituting what we call civilization. 
Of this the qualities by which we try to distinguish what 
we mean by civilization are the attributes. It does indeed, 
I think, best present itself to our apprehension in the 
likeness of a larger and greater man, arising out of and 
from the cooperation of individual men to satisfy their 
desires, and constituting, after the evolution which finds 
its crown in the appearance of man himself, a new and 
seemingly illimitable field of progress. 

This body economic, or Greater Leviathan, always pre- 
cedes and always underlies the body politic or Leviathan. 
The bod}'- politic or state is really an outgrowth of the 
body economic, in fact one of its organs, the need for 
which and appearance of which arises from and with its 
own appearance and growth. And from this relation of 
dependence upon the body economic, the body politic can 
never become exempt. 

Why, then, it may be asked, is it that we take for the 
greater and precedent a word drawn from the lesser and 
subsequent, and find in the word civilization, which ex- 
presses an analogy to the body politic, the word that 
serves us as a name for the body economic ? The reason 



28 THE MEANING OF POLITICAL ECONOMY. Boolcl. 

of this is worth noting, as it flows from an important 
principle in the growth of human knowledge. Things 
that come first in the natural order are not always first 
apprehended. As the human eye looks out, but not in, so 
the human mind as it scans the world is apt to observe 
what is of the superstructure of things before it observes 
what is of the foimdation. 

The body politic is more obvious to our eyes, and, so to 
speak, makes- more noise in our ears, than the unseen and 
silent body economic, from which it proceeds and on which 
it depends. Thus, in the intellectual development of 
mankind, it and its relations are noticed sooner and receive 
names earlier than the body economic. And the words so 
made part of our mental furniture, afterwards by their 
analogies furnish us with words needed to express the 
body economic and its relations when later in intellectual 
growth we come to recognize it. Thus it is that while the 
thing civilization nmst in the natural order precede the 
body politic or state, yet when in the development of 
human knowledge we come to recognize this thing, we take 
to express it and its relations words already in use as ex- 
pressive of the body politic and its relations. 

But without at present pursuing further that record of 
the history of thought that lies in the meaning of words, 
let us endeavor to see whence comes the integration of 
men into a body economic and how it grows. 



CHAPTER V. 
THE ORIGIN AND GENESIS OF CIVILIZATION. 

SHOWING THE NATURE OF REASON ; AND HOW IT IMPELS TO 
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS. 

Reason the power of tracing causal relations— Analysis and syn- 
thesis — Likeness and nnlikeness between man and other animals 
—Powers that the apprehension of causal relations gives— Moral 
connotations of ci-\dlization— But begins with and increases 
through exchange— Civilization relative, and exists in the spirit- 
ual. 

MAN is an animal ; but an animal plus something more 
—the divine spark differentiating him from all other 
animals, which enables him to become a maker, and which 
we call reason. To style it a divine spark is to use a fit 
figure of speech, for it seems analogous to, if not indeed 
a lower form of, the power to which we must attribute the 
origin of the world ; and like light and heat radiates and 
enkindles. 

The essential quality of reason seems to lie in the power 
of tracing the relationship of cause and effect. This power, 
in one of its aspects, that which proceeds from effect to 
cause, thus, as it were, taking things apart, so as to see 
how they have been put together, we call analysis. In 
another of its aspects, that wliich proceeds from cause to 
effect, thus, as it were, putting things together, so as to 
see in what they result, we caU synthesis. In both of 

29 



30 THE MEANING OF POLITICAL ECONOMY. Booh I. 

these aspects, reason, I think, involves the power of pic- 
turing things in the mind, and thus making what we may 
call mental experiments. 

Whoever will take the trouble (and if he has the time, 
he will find in it pleasure) to get on friendly and intimate 
terms with a dog, a cat, a horse, or a pig, or, still better,— 
since these animals, though they have four limbs like ours, 
lack hands,— with an intelligent monkey, will find many 
things in which our "poor relations" resemble us, or 
perhaps rather, we resemble them. 

To such a man these animals will exhibit traces at least 
of all human feelings— love and hate, hope and fear, pride 
and shame, desire and remorse, vanity and curiosity, 
generosity and cupidity. Even something of our small 
vices and acquired tastes they may show. Goats that 
chew tobacco and hke their dram are known on shipboard, 
and dogs that enjoy carriage-rides and like to run to fires, 
on land. "Bummer" and his client "Lazarus" were as 
well known as any two-legged San Franciscan some thirty- 
five or forty years ago, and until their skins had been 
affectionately stuffed, they were "deadheads" at free 
lunches, in public conveyances and at public functions. 
I bought in Calcutta, when a boy, a monkey which all the 
long way home would pillow her little head on mine as I 
slept, and keep off my face the cockroaches that infested 
the old Indiaman by catching them with her hands and 
cramming them into her maw. "When I got her home, she 
was so jealous of a little brother that I had to part with 
her to a lady who had no children. And my own children 
had in New York a little monkey, sent thera from Para- 
guay, that so endeared herself to us all that when she died 
from over-indulgence in needle-points and pinheads it 
seemed like losing a member of the family. She knew 
my step before I reached the door on coming home, and 
when it opened would spring to meet me with chattering 



CJiap. V. ORIGIN AND GENESIS OF CIVILIZATION. 31 

caresses, the more prolonged the longer I had been away. 
She leaped from the shoulder of one to that of another at 
table ; nicely discriminating between those who had been 
good to her and those who had offended her. She had all 
the curiosity attributed to her sex in man, and a vanity 
most amusing. She would strive to attract the attention 
of visitors, and evince jealousy if a child called off their 
notice. At the time for school-children to pass by, she 
would perch before a front window and cut monkey shines 
for their amusement, chattering with delight at their 
laughter and applause as she sprang from curtain to 
curtain and showed the couA^enience of a tail that one may 
swing by. 

How much "human nature" there is in animals, who- 
ever treats them kindly knows. We usually become most 
intimate with dogs. And who that has been really inti- 
mate mth a generous dog has not sympathized with the 
children's wish to have him decently buried and a prayer 
said over him? Or who, when he saw at last the poor 
beast's stiffened frame, could, despite his accustomed 
philosophy which reserves a future life to man alone, re- 
frain from a moment's hope that when his own time came 
to cross the dark river his faithful friend might greet him 
on the other shore? And must we say, Nay? The title 
by which millions of men prefer to invoke the sacred 
name, it is not "the All Mighty," but "the Most Mer- 
ciful." 

One of the most striking differences between man and 
the lower animals is that which distinguishes man as the 
unsatisfied animal. Yet I am not sure that this is in itself 
an original difference ; an essential difference of kind. I 
am, on the contrary, as I come closely to consider it, in- 
clined rather to think it a result of the endowment of man 
with the quality of reason that animals lack, than in itself 
an original difference. 



32 THE MEANING OF POLITICAL ECONOMY. Boolcl. 

For, on the one side, we see that men when placed in 
conditions that forbid the hope of improvement do become 
almost if not quite as stolidly content with no greater 
satisfactions than their fathers could obtain as the mere 
animals are. And, on the other side, we see that, to some 
extent at least, the desires of animals increase as oppor- 
tunities for gratifying them are afforded. Give a horse 
lump-sugar and he will come to you again to get it, though 
in his natural state he aspires to nothing beyond the herb- 
age. The pampered lap-dogs whose tails stick out from 
warm coats on the fashionable city avenues in winter seem 
to enjoy their clothing, though they could never solve the 
mystery of how to get it on, let alone how to make it. 
They come to want the daintiest food served in china on 
soft carpets, while dogs of the street will fight for the 
dirtiest bone. I know a cat in the mountains that lives 
in the woods all the months when leaves are green, but 
when thejr turn and die seeks the farmer's hearth. The 
big white puss that lies curled in the soft chair beside the 
stove in the hall below, and who will swell and purr with 
satisfaction when I scratch her head and stroke her back 
as I pass down, hardly dared sneak into the house a few 
weeks ago, but now tha^t she finds she is welcome is content 
with nothing less than the softest couch and the warmest 
fii'e. And the shaggy dog that likes so well to sit in a boat 
and watch the water as it plashes by, makes me wonder 
sometimes if he would not want a nicely cushioned naph- 
tha launch if he could make out how to get one. Even 
man is content with the best he can get until he begins to 
see he can get better. A handsome woman I have met, 
who puts on for ball or opera an earl's ransom in gems, 
and must have a cockade in her coachman's hat and bicj^cle 
tires on her carriage-wheels, will tell you that once her 
greatest desire was for a new wash-tub and a better 
cooking-stove. 



Chai). V. OEIGIN AND GENESIS OF CIVILIZATION. 33 

The more we come to know the animals the harder we 
find it to draw any clear mental line between them and 
us, except on one point, as to which we may see a clear 
and profound distinction. This, that animals lack and 
that men have, is the power of tracing effect to cause, and 
from cause assuming effect. Among animals this want is 
to some extent made up for by finer sense-perceptions and 
by the keener intuitions that we call instinct. But the line 
that thus divides us from them is nevertheless wide and 
deep. Memory, which the animals share with man, enables 
them to some extent to do again what they have been first 
taught to do ; to seek what they have found pleasant, and 
to avoid what they have found painful. They certainly 
have some way of communicating their impressions and 
feelings to others of their kind which constitutes a rudi- 
mentary language, while their sharper senses and keener 
intuitions serve them in some cases where men would be 
at fault. Yet thej'- do not, even in the simplest cases, show 
the ability to " think a thing out," and the wiliest and most 
sagacious of them may be snared and held by devices the 
simplest man would with a moment's reflection "see his 
way through."* 

Is it not in this power of "thinking things out," of 
"seeing the way through" — the power of tracing causal 
relations— that we find the essence of what we call rea- 
son, the possession of which constitutes the unmistakable 
difference, not in degree but in kind, between man and the 
brutes, and enables him, though their fellow on the plane 
of material existence, to assume mastery and lordship over 
them all! 

Here is the true Promethean spark, the endowment to 

* I do not of course include the animals of fairy tale, nor the 
superordinary dogs that Herbert Spencer's correspondents write to 
him abont. See Herbert Spencer's "Justice," Appendix D, or my 
"A Perplexed Philosopher," p. 285. 



34 THE MEANING OP POLITICAL ECONOMY. Booh I. 

wliicli the Hebrew Scriptures refer when they say that 
God created man in His own image ; and the means by 
which we, of all animals, become the only progressive 
animal. Here is the germ of civilization. 

It is this power of relating effect to cause and cause to 
effect which renders the world intelligible to man ; which 
enables him to understand the connection of things around 
him and the bearings of things above and beyond him ; to 
live not merely in the present, but to pry into the past 
and to forecast the future ; to distinguish not only what 
are presented to him through the senses, but things of 
which the senses cannot tell ; to recognize as through mists 
a power from which the world itself and all that therein 
is must have proceeded ; to know that he himself shall 
surely die, but to believe that after that he shall live 
again. 

It is this power of discovering causal relations that en- 
ables him to bring forth fire and call out light ; to cook 
food ; to make for himself coats other than the skin with 
which nature clothes him ; to build better habitations than 
the trees and caves that nature offers ; to construct tools ; 
to forge weapons ; to bury seeds that they may rise again 
in more abundant life; to tame and breed animals; to 
utilize in his service the forces of nature ; to make of water 
a highway ; to sail against the wind and lift himself by 
the force that pulls all things down; and gradually to 
exchange the poverty and ignorance and darkness of the 
savage state for the wealth and knowledge and light that 
come from associated effort. 

All these advances above the animal plane, and all that 
they imply or suggest, spring at bottom from the power 
that makes it possible for a man to tie or untie a square 
knot, which animals cannot do ; that makes it impossible 
that he should be caught in a figure-4 trap as rabbits and 
birds are caught, or should stand helpless like a bull or a 



Chap. V. ORIGIN AND GENESIS OF CIVILIZATION. 35 

horse that has wound his tethering-rope around a stake 
or a tree, not knowing in which way to go to loose it. 
This power is that of discerning the relation between cause 
and effect. 

We measure civilization in various ways, for it has 
various aspects or sides; various lines along which the 
general advance implied in the word shows itself — as in 
knowledge, in power, in wealth, in justice and kindliness. 
But it is in this last aspect, I think, that the term is most 
commonly used. This we may see if we consider that the 
opposite of civilized is savage or barbarous. Now savage 
and barbarous refer in common thought and implication 
not so much to material as to moral conditions, and are 
synonyms of ferocious or cruel or merciless or inhuman. 
Thus, the aspect of civilization most quickly apprehended 
in common thought is that of a keener sense of justice and 
a kindlier feeling between man and man. And there is 
reason for this. While an increased regard for the rights 
of others and an increased sympathy with others is not 
all there is in civilization, it is an expression of its moral 
side. And as the moral relates to the spiritual, this aspect 
of civilization is the highest, and does indeed furnish the 
truest sign of general advance. 

Yet for the line on which the general advance primarily 
proceeds, for the manner in which individual men are 
integrated into a body economic or greater man, we must 
look lower. Let us try to trace the genesis of civilization. 

Gifted alone with the power of relating cause and effect, 
man is among all animals the only producer in the true 
sense of the term. He is a producer, even in the savage 
state ; and would endeavor to produce even in a world 
where there was no other man. But the same quality of 
reason which makes him the producer, also, wherever 
exchange becomes possible, makes him the exchanger. 
And it is along this line of exchanging that the body 



36 THE MEANING OF POLITICAL ECONOMY. Boole I. 

economic is evolved and develops, and that all the advances 
of civilization are primarily made. 

But while production must have begun with man, and 
the first human pair to appear in the world, we may con- 
fidently infer, must have begun to use in the satisfaction 
of their wants a power essentially different in kind from 
that used by animals, they could not begin to use the 
higher forms of that power until their numbers had in- 
creased. With this increase of numbers the cooperation 
of efforts in the satisfaction of desires would begin. Aided 
at fii'st by the natural affections, it would be carried be- 
yond the point where these suffice to begin or to continue 
cooperation by that quality of reason which enables the 
man to see what the animal cannot, that by parting with 
what is less desii'ed in exchange for what is more desu'ed, 
a net increase in satisfaction is obtained. 

Thus, by virtue of the same power of discerning causal 
relations which leads the primitive man to construct tools 
and weapons, the individual desires of men, seeking satis- 
faction through exchange with their fellows, would operate, 
like the microscopic hooks which are said to give its felting 
quality to wool, to unite individuals in a mutual coopera- 
tion that would weld them together as interdependent 
members of an organism, larger, wider and stronger than 
the individual man— the earlier and Greater Leviathan that 
I have called the body economic. 

With the beginning of exchange or trade among men 
this body economic begins to form, and in its beginning 
civilization begins. The animals do not develop ci\dliza- 
tion, because they do not trade. The simulacra of civili- 
zation which we observe among some of them, such as 
ants and bees, proceed from a lower plane than that of 
reason— from instinct. While such organization is more 
perfect in its beginnings, for instinct needs not to learn 



Chap. V. ORIGIN AND GENESIS OF CIVILIZATION. 37 

from experience, it lacks all power of advance. Reason 
may stnmble and fall, but it involves possibilities of what 
seem like infinite progression. 

As trade begins in different places and proceeds from 
different centers, sending out the network of exchange 
which relates men to each other through their needs and 
desires, different bodies economic begin to form and to 
grow in different places, each with distinguishing char- 
acteristics which, like the characteristics of the individual 
face and voice, are so fine as only to be appreciated rela- 
tively, and then are better recognized than expressed. 
These various civilizations, as they meet on their margins, 
sometimes overlap, sometimes absorb, and sometimes over- 
throw one another, according to a vitalitj^ dependent on 
their mass and degree, and to the manner in which their 
juxtaposition takes place. 

We are accustomed to speak of certain peoples as un- 
civilized, and of certain other peoples as civilized or fully 
civilized, but in truth such use of terms is merely relative. 
To find an utterly uncivilized people we must find a people 
among whom there is no exchange or trade. Such a people 
does not exist, and, so far as our knowledge goes, never 
did. To find a fully civilized people we must find a people 
among whom exchange or trade is absolutely free, and has 
reached the fullest development to which human desires can 
carry it. There is, as yet, unfortunately, no such people. 

To consider the history of civilization, with its slow 
beginnings, its long periods of quiescence, its sudden flashes 
forward, its breaks and retrogressions, would carry me 
further than I can here attempt. Something of that the 
reader may find in the last grand division of '' Progress 
and Poverty," Book X., entitled, ''The Law of Human 
Progress." What I wish to point out here is in what 
civilization essentially and primarily consists. 



38 THE MEANING OF POLITICAL ECONOMY. BoolcL 

But this is to be remembered : Neither what we speak 
of as different civilizations nor yet what we call civilization 
in the abstract or general has existence in the material or 
is directly related to rivers and mountains, or divisions 
of the earth's surface. Its existence is in the mental or 
spii'itual. 



CHAPTER VI. 

OF KNOWLEDGE AND THE GROWTH OF 
KNOWLEDGE. 

SHO^^TNG THAT THE GROWTH OF KNOWLEDGE IS BY COOP- 
ERATION, AND THAT IT INHERES IN THE SOCIETY. 

Civilization implies greater knowledge— This gain comes from co- 
operation — The incommunicable knowing called skill — The com- 
municable knowing usually called knowledge— The relation of 
systematized knowledge to the means of storing knowledge, to 
skill and to the economic body— Illustration from astronomy. 

IN contrasting man in the civilized state with man in 
his primitive state I liave dwelt most on the gain in 
the power of gratifying material desii'es, because such gains 
are most obvious. Yet as thought precedes action, the 
essential gain which these indicate must be in knowledge. 
That the ocean steamship takes the place of the hollow 
log, the great modern building of the rude hut, shows a 
larger knowledge utilized in such constructions. 

To consider the nature of this gain in knowledge is to 
see that it is not due to improvement in the individual 
power of knowing, but to the larger and mder cooperation 
of individual powers; to the growth of that body of 
knowledge which is a part, or rather, perhaps, an aspect 
of the social integration I have called the body economic. 
If we could separate the individuals whose knowledge, 
correlated and combined, is expressed in the ocean steam- 
ship or great modern building, it is doubtful if their sepa- 

39 



40 THE MEANINa OF POLITICAL ECONOMY. Bool I. 

rate knowledge would suffice for more tlian the construc- 
tions and tools of tlie savage. 

The knowledge that comes closest to the individual is 
what we call skill, which consists in knowing how to 
govern the organs directly responsive to the conscious 
will, so as to bring about desired results. Whoever, in 
mature years, has learned to do some new thing, as for 
instance to ride a bicycle, knows how slowly and painfully 
such knowledge is acquired. At first each leg and foot, 
each arm and hand, to say nothing of the muscles of the 
chest and neck, seems to need separate dii-ection, which 
the conscious mind cannot give so quickly and in such 
order as to prevent the learner from falling off or running 
into what he would avoid. But as the effort is continued, 
the knowledge of how to direct these muscles passes from 
the domain of the conscious to that of the subconscious 
mind, becoming part of what we sometimes call the memory 
of the muscles, and the needed correlation takes place with 
the will to bring about the result, or automatically. For 
a while, even after one has learned to hold on and keep his 
wheel moving, the exertion needed will be so great and his 
attention will be so absorbed in this, that he can look 
neither to right nor to left, nor notice what he passes. 

But with continued effort, the knowledge required for 
the proper movement of the muscles becomes so fully stored 
in the subconscious memory that at length the learner may 
ride easily, indulging in other trains of thought and notic- 
ing persons and scenery. His hard-gotten knowledge has 
passed into skill. 

So in learning to use a typewriter. We must at first 
find out, and with a separate effort strike the key for each 
separate letter. But as this knowledge takes its place in 
the subconscious memory, we merely think the word, and 
without further conscious direction, the fingers, as we need 
the letters, strike their keys. 



Cliap.VI. KNOWLEDGE AND GEOWTH OF KNOWLEDGE. 41 

This is how all skill is gained. We may see it in the 
child. We may see him gradually acquiring skill in doing 
things that we have forgotten that we ourselves had to 
learn how to do. When a new man comes into the world 
he seems to know only how to cry. But by degrees, and 
evidentl}^ in the same way by which so many of us over 
fifty have learned to ride a bicycle, he learns to suck ; to 
laugh ; to eat ; to use his eyes ; to grasp and hold things ; 
to sit ; to stand ; to walk ; to speak ; and later, to read, to 
write, to cipher, and so on, through all the kinds and de- 
grees of skill. 

Now, because skill is that part of knowledge which 
comes closest to the individual, becoming as it were a part 
of his being, it is the knowledge which is longest retained, 
and is also that which ca,nnot be communicated from one 
to another, or so communicated only in very small degree. 
You may give a man general dii'ections as to how to ride 
a bicycle or operate a typewriter, but he can get the skill 
necessary to do either only by practice. 

As to this part of knowledge at least, it is clear that the 
advances of civilization do not imply any gain in the 
power of the individual to acquire knowledge. Not only 
do antiquities show that in arts then cultivated the men of 
thousands of years ago were as skilful as the men of to-day, 
but we see the same thing in our contact with people whom 
we deem the veriest savages, and the Australian black 
fellow will throw a boomerang in a way that excites the 
wonder of the civilized man. On the other hand, the 
European with sufficient practice will learn to handle the 
boomerang or practise any of the other arts of the savages 
as skilfully as they, and wild tribes to whom the horse and 
firearms are first introduced by Europeans become excel- 
lent riders and most expert marksmen. 

It is not in skill, but in the knowledge which can be 
communicated from one to another, that the civilized man 



42 THE MEANING OF POLITICAL ECONOMY. Boolcl. 

shows his superiority to the savage. This part of know- 
ledge, to which the term knowledge is usually reserved, 
as when we speak of knowledge and skill, consists in a 
knowing of the relation of things to other external things, 
and may, but does not always or necessarily, involve a 
knowing of how to modify those relations. This know- 
ledge, since it is not concerned with the government of the 
organs directly responsive to the conscious will, does not 
come as close to the individual as skill, but is held rather 
as a possession of the organ of conscious memory, than as 
a part of the individual himself. While thus subject to 
loss with the weakening or lapse of that organ, it is also 
thus communicable from one to another. 

Now, this is the knowledge which constitutes the bod}^ 
of knowledge that so vastly increases with the progress of 
civilization. Being held in the memory, it is transferable 
by speech ; and as the development of speech leads to the 
adoption of means for recording language, it becomes 
capable of more permanent storage and of wider and easier 
transferability— in monuments, manuscripts, books, and 
so on. 

This ability to store and transmit knowledge in other 
and better ways than in the individual memory and in 
individual speech, which comes with the integration of 
individual men in the social body or body economic, is 
of itself an enormous gain in the advance of the sum of 
knowledge. But the gain in other and allied directions 
that comes from the larger and closer integration of indi- 
viduals in the social man is greater still. Of the sys- 
tematized knowledges, that which we call astronomy was 
probably one of the earliest. Consider the fii'st star-gazers, 
who with no instrument of observation but the naked eyes, 
and no means of record save the memory, saw by watch- 
ing night after night related movements in the heavenly 
bodies. How little even of their own ability to gather and 



Cluq^. VI. KNOWLEDGE AND GROWTH OF KNOWLEDGE. 43 

store knowledge could they apply to the getting of such 
knowledge. For until civilization had passed its first 
stages, the knowledge and skill required to satisfy their 
own material needs must have very seriously lessened the 
energy that could be applied to the gaining of any other 
knowledge. 

Compare with such an observer of the stars, the star- 
gazer who watches now in one of the great modern observa- 
tories. Consider the long vistas of knowledge and skill, 
of experiment and meditation and effort, that are involved 
in the existence of the building itself, with its mechanical 
devices; in the great lenses; in the ponderous tube so 
easily adjusted ; in the delicate instruments for measuring- 
time and space and temperature ; in the tables of logarithms 
and mechanical means for effecting calculations; in the 
lists of recorded observations and celestial atlases that may 
be consulted ; in the means of communicating by telegraph 
and telephone with other observers in other places, that 
now characterize a well-appointed observatory, and in the 
means and appliances for secui-ing the comfort and freedom 
from distraction of the observer himself ! To consider all 
these is to begin to realize how much the cooperation of 
other men contributes to the work of even such a special- 
ized individual as he who watches the stars. 



CHAPTER VII. 

OF SEQUENCE, CONSEQUENCE AND LAWS OF 
NATURE. 

SHOWING THE PROPER MEANING OF SEQUENCE AND OP CON- 
SEQUENCE, AND WHY WE SPEAK OP LAWS OP NATURE. 

Coexistence and succession— Sequence and consequence— Causes in 
series ; names for tliem— Our direct knowledge is of spirit- 
Simplest perception of causal relation — Extensions of this— Tlie 
causal search unsatisfied till it reaches spirit— And finds or as- 
sumes intent— Early evidences of this— Why we must assume a 
superior spirit. —Evidences of intent— The word nature and its 
implication of will or spirit— The word law— The term "law of 
nature." 

WHETHER all our knowledge of the relations of 
things in the external world comes to ns primarily 
by experience and through the gates of the senses, or 
whether there is some part of such knowledge of which 
we are intuitively conscious and which belongs to our 
human nature as its original endowment, are matters as 
to which philosophers are, and probably always will be, at 
variance. But into such discussions, mainly verbal as 
they are, it is needless for us to enter. For what concerns 
us here the distinctions made in ordinary perceptions and 
common speech will suffice. 

In the phenomena presented to him, man must early 
notice two kinds of relation. Some things show themselves 

44 



Chap.VII. OF THE LAWS OF NATURE. 45 

with other things, and some things follow other things. 
These two kinds of relation we call relations of coexistence, 
and relations of succession or sequence. Since what con- 
tinues is Jiot so apt to attract our attention as what 
changes, it is probable that the first of these two relations 
to be noticed is. that of succession. Light comes with the 
ai3pearance of she luminous bodies of the firmament, and 
darkness with their disappearance. Night succeeds day, 
and day night ; spring the winter, and summer the spring ; 
the leaf, the bud ; and wind and rain the heavy threaten- 
ing cloud. The approach to fire is followed by a pleasant 
sensation as we get close enough to it, and by a most painful 
sensation if we get too close. The eating of some things 
is succeeded by satisfaction; the eating of other things 
by pain. 

But to note the relation of things in succession does not 
content man. The essential quality of reason, the power 
of discerning causal relations, leads him to ask why one 
thing follows another, and in the relation of sequence to 
assume or to seek for a relation of con-sequence. 

Let us fix in our minds the meaning of- these two words. 
For even by usually careful writers one of them is some- 
times used when the other is really meant, which brings 
about confusion of thought where precision is needed. • 

The proper meaning of sequence is that which follows 
or succeeds. The proper meaning of consequence is that 
which follows from. To say that one thing is a sequence 
of another, is to sa,y that the one has to the other a relation 
of succession or coming after. To say that one thing is a 
consequence of another, is to say that the one has to the 
other a relation not merely of succession, but of necessary 
succession, the relation namely of effect to cause. 

Now of the sequences which we notice in external nature, 
some are variable, that is to say, they do not always follow 
what is given as the antecedent, while some are invariable, 



46 THE MEANING OF POLITICAL ECONOMY. Booh I. 

that is to say, they always follow what is given as the 
antecedent. As to these invariable sequences, which we 
properly call consequences, we give a name to the causal 
connection between what we apprehend as effect and what 
we assume as cause by calling it a law of nature. What 
we mean by this term is a matter too important to be left 
in the uncertainty and confusion with which it is treated 
in the standard economic works. Let us therefore, before 
beginning to use the term, try to discover how it has come 
into use, that we may fully understand it. 

When, proceeding from what we apprehend as effect or 
consequence, we begin to seek cause, it in most cases hap- 
pens that the first cause we find, as accounting for the 
phenomena, we soon come to see to be in itself an effect 
or consequence of an antecedent which to it is cause. 
Thus our search for cause begins again, leading us from 
one link to another link in the chain of causation, until 
we come to a cause which we can apprehend as capable of 
setting in motion the series of which the particular result 
is the effect or consequence. 

In a series of causes, what we apprehend as the begin- 
ning cause is sometimes called ''primary cause" and 
sometimes " ultimate cause ; " while " final cause," which 
has the meaning of purpose or intent, hes deeper still. 
This use of seemingly opposite names for the same thing- 
may at first puzzle others as at first it puzzled me. But 
it is explained when we remember that what is first and 
what last in a chain or series depends upon which end we 
start from. Thus, when we proceed from cause towards 
effect, the beginning cause comes first, and is styled the 
" primary cause." But when we start from effect to seek 
cause, as is usually the case, for we can know cause as 
cause only when it lies in our own consciousness, the 
cause nearest the result comes first, and we call it the 
" proximate cause ; " and what we apprehend as the begin- 



Chaj).riL OP THE LAWS OF NATURE. 47 

niug cause is found last, and we call it the " ultimate " or 
" efficient cause/' or, at least where an intelligent will is 
assumed, as the all-originator, the "final cause;" while 
those which lie between either end of the chain are styled, 
sometimes " secondary," and sometimes " intermediate 
causes." 

Now the only way in which we can hope to discover 
what to us is yet unknown is by reasoning to it from what 
to us is known. What we know most directly and imme- 
diately is that in us which feels and wills ; that which to 
distinguish from our own organs, parts or powers we call 
the ego, or I; that which distinguishes us, ourselves, from 
the external world, and which is included in the element 
or factor of the world that in Chapter I, we called spirit. 

Man himself, in outward a.nd tangible form at least, is 
comprehended in nature, even in what, when we make the 
distinction between subjective and objective, we call ex- 
ternal nature. His body is but a part of the, to us, inde- 
structible matter, and the motion which imbues it and 
through which he may modify external things, is but part 
of the, to us, indestructible energy which existed in nature 
before man was, and which will remain, nothing less and 
nothing more, after he is gone. As I brought into the 
world no matter or motion, but from the time of my first 
tangible existence as a germ or cell have merely used the 
matter and motion ah'cady here, so I take nothing away 
when I depart. Whether, when I am done with it, my 
body be cremated or buried or sunk in the depths of the 
sea, the matter which gave it form and the energy which 
gave it movement do not cease to be, but continue to exist 
and to act in other forms and other expressions. 

That which really distinguishes man from external na- 
ture ; that which seems to come into the world with the 
dawning of life and to depart from it with death, is that 
whose identity I recognize as ''me," through all changes 



48 THE MEANING OF POLITICAL ECONOMY. Booli I. 

of matter and motion. It is this which not only receives 
the impressions brought to it through the senses, but by 
the use of the j)Ower we call imagination contemplates 
itself, as one may look at his own face in a mirror. In 
this way the ego or I of man may reason, not only upon 
the phenomena of the external world as presented to it 
through the senses, but also upon its own nature, its- own 
powers, and its own activities, and regard the world, ex- 
ternal and internal, as a whole, having for its components 
not merely matter and energy, but also spirit. 

Whatever doubts any one may entertain or profess to 
entertain of the existence of what we have called spirit, 
can come only, I think, from a confusion in words. For 
the one thing of which each of us must be most certain is 
that " I am." And it is through this assurance of our own 
existence that we derive certainties of all other existence. 

The simplest causal relation we perceive is that which 
we find in our own consciousness. I scratch my head, I 
slap my leg, and feel the effects, I drink, and my thirst is 
quenched. Here we have perhaps the closest connection 
between consequence and cause. The feeling of head or 
leg or stomach, which here is consequence, transmitted 
through sense to the consciousness, finds in the direct 
perceptions of the same consciousness, the cause— an 
exertion of the will. Or, reversely, the conscious exertion 
of the will to do these things produces through the senses 
a consciousness of result. How this connection takes place 
we cannot really tell. When we get to that, the scientist 
is as ignorant as the savage. Yet, savage or scientist, we 
all know, because we feel the relation in such cases between 
cause and consequence. 

Passing beyond the point where both cause and effect 
a,re known by consciousness, we carry the certainty thus 
derived to the explanation of phenomena as to which cause 
and effect, one or both, lie beyond consciousness, I throw 



Chaxj.ril. OF THE LAWS OF NATUEE. 49 

a stone at a bird and it falls. This result, the fall of the 
bird, is made known to me indirectly through my sense of 
sight, and later when I pick it up, by my sense of touch. 
The bird falls because the stone hit it. The stone hit it 
because put in motion by the movement of my hand and 
arm. And the movement of my hand and arm was be- 
cause of my exertion of will, known to me directly by 
consciousness. 

What we apprehend as the beginning cause in any series, 
whether we call it primary cause or final cause, is always 
to us the cause or sufficient reason of the particular result. 
And this point in causation at which we rest satisfied is 
that which implies the element of spirit, the exertion of 
will. For it is of the nature of human reason never to 
rest content until it can come to something that may be 
conceived of as acting in itself, and not merely as a 
consequence of something else as antecedent, and thus 
be taken as the cause of the result or consequence from 
which the backward search began. Thus, in our instance, 
leaving out intermediate links in the chain of causation, 
and proceeding at once from result to ultimate cause, or 
sufficient reason, we say correctly that the bird fell because 
I hit it — that is, because I exerted in an effective way the 
will to hit it. 

But I know, by consciousness, that in me the exertion 
of will proceeds from some motive or desu'e. And reason- 
ing from what I know to explain what I wish to discover, 
I explain similar acts in others by similar desii'es. 

So, if one man brain another by striking him with a 
club, or bring about his death more gradually by giving 
him a slow poison, we should feel that we were being played 
with and our intelligence insulted if on asking the cause 
of death we were told it was because a club struck him, 
or because breath failed him. We are not satisfied until 
we know what will was exerted to put into action the 



50 THE MEANING OF POLITICAL ECONOMY. Booh I , 

proximate causes of the result. Nor does this completely 
satisfy us. After we know the how, we are apt to ask the 
^}iy_the purpose or motive that prompted this exertion 
of will. It is not till we get some answer to this that we 
feel completely satisfied. 

And thus, we sometimes make a still shorter cut in our 
causal explanation, by dropping will itself, and speaking 
of the desire which prompts to the exertion of will as the 
cause of an effect. I see another walk or run or climb a 
tree. From what I know of the causes of my own acts, I 
recognize in this an exertion of will prompted by desire— 
the tangible manifestation of an intent ; and say, he walks 
or runs or climbs the tree because he wants to get or do 
or avoid something. So when we see the bird fly, the fish 
swim, the mole or gopher burrow in the ground, we also 
recognize in their acts similar intent— the exertion of will 
prompted by desire. 

Now, this motive or intent or purpose or desire to bring 
about an end, which sets an efficient cause to work, was 
recognized by Aristotle, and the logicians and meta- 
physicians who so long followed him, as properly a cause, 
and a beginning cause, and called in their terminology the 
" final cause." This term has now, however, become limited 
in its use to the idea of purpose or intent in the mind of 
the Supreme Being, and the " doctrine of final causes," now 
largely out of fashion, is understood to mean the doctrine 
which, as the last or final explanation of the existence and 
order of the world, seeks to discover the purpose or intent 
of the Creator. The argument from the assumption of 
what are now called final causes for the existence of an 
intelligent Creator is called the " teleological argument," 
and is by those who have the vogue in modern philosophy 
regarded with suspicion, if not with contempt. Neverthe- 
less, the recognition of purpose or iutent as a final or 
beginning cause is still to be found in that homely logic 



Chap.riL OF THE LAWy OF NATURE. 51 

that fills the common speech of ordinary people with 
"becauses." 

How early and how strong- is the disposition to seek 
canse in the exertion of will prompted by desire is shown 
in the prattle of children, in folk-lore and fairy tales. We 
are at first apt to attribnte even to what we afterwards 
learn are inanimate things the exertion of will and the 
promptings of desire such as we find in our own conscious- 
ness, and to say, not as figures of speech, but as recogni- 
tions of cause, that the sun smiles and the clouds threaten 
and the wind blows for this or that purpose or with this 
or that intent. 

And in the earliest of such recognitions we find the 
moral element, which belongs alone to spirit. What 
mother has not soothed her child by threatening or pre- 
tending to whip the naughty chair or bad stone that caused 
her little gii'l or boy to stumble, and has not held the little 
thing in rapt silence with stories of talking animals and 
thinking trees? But as we look closer, we see that the 
power of reason is not in animals, nor volition in sticks^ 
and stones. Yet still seeking cause behind effect, and not 
satisfied that we have found cause until we have come to 
spirit, we find rest for a while by accounting for effects 
that we cannot trace to will in men or animals, on the 
assumption of will in supersensible forms, and thus gratify 
the longing of the reason to discover cause, by peopling 
rivers and mountains and lakes and seas and trees and 
seasons with spirits and genii, and fairies and goblins, and 
angels and devils, and special gods. 

Yet, in and through this stage of human thought grows 
the apprehension of an order and co-relation in things, 
which we can understand only by assuming unity of will 
and comprehensiveness of intent— of an all-embracing 
system or order which we personify as Nature, and of a 
great " I am " from whose exertion of will all things visible 



52 THE MEANING OF POLITICAL ECONOMY. Booli I. 

and invisible proceed, and which is the first or all-begin- 
ning cause. In every direction the effort of the reason to 
seek the cause of what it perceives, forces this upon the 
thoughtful mind. 

The bird flies because it wants to fly. In this will or 
spirit of the bird we find an ultimate cause or sufficient 
reason to satisfy us so far as such action is concerned. 
But probably no man ever hved, and certainly no child, 
who, seeing the easy sweep of bii'ds through the open 
highways of air, has not felt the wish to do likewise. Why 
does not the man also fly when he wants to fly? We 
answer, that while the bird's bodily structure permits of 
the gratification of a will to flj^, the man's bodily structure 
does not. But what is the reason of this difference ? Here 
Vv^e come to a sphere where we can no longer find the cause 
of result in the iudividual will. Seeking still for wiU, as 
the only final explanation of cause, we are compelled to 
assume a higher and more comprehensive will or spirit, 
which has given to the bu'd one bodily structure, to the 
man another. 

Or take the man himself. The child cries because it 
wants to cry and laughs because it wants to laugh. But 
that its teeth begin to come at the proper age— is it be- 
cp.use it wants teeth ? In one sense, yes ! When its teeth 
begin to come it begins to need teeth ; or rather wiU shortly 
begin to need teeth, to fit for its stomach the more solid 
food it will then require. But in another, and in what we 
are discussing, the real sense, no ! The need for teeth 
when they begin to come is not a need of the child as it 
then is, but a need of the child as it will in future be; a 
totally different being so far as consciousness is concerned. 
The yet sucking cliild can no more want teeth, in the sense 
of desiring teeth, than the adult can want to have those 
teeth pulled out for the sake of the pulling. The coming 
of teeth is not pleasant, but painful— seemingly more 



Chajp.VII. or THE LAWS OF NATURE. 53 

painful and probably more dangerous than is tlie pulling 
of teeth by modern dentistry. It is clearly not by the 
will of the child that we can explain the coming of teeth. 
Nor yet can we explain it by the will of the mother. She 
may desire that the child's teeth should come. But she 
cannot make her will effective in any larger degree than 
by rubbing the child's gums. Nor can the most learned 
physician help her further than by lancing them, should 
they seriously swell. To find a sufficient cause for this 
effect, we are compelled to assume a higher will and more 
comprehensive purpose than that of man ; a will conscious 
from the very first of what will yet be needed, as well as 
of what already is needed. 

The things that show most clearly the adaptation of 
means to ends, so that we can at once understand their 
genesis and di^dne their cause, are things made by man, 
such as houses, clothing, tools, adornments, machines ; in 
short, what we call human productions. These, as evincing 
the adaptation of means to ends, have an unmistakable 
character. The coming upon a piece of clothing, or a 
brooch or ring, or tomahawk or bow, or the embers and 
fragments of a cooked meal, woidd have been as quick and 
even surer proof of the presence of man on his supposed 
desert island than were to Robinson Crusoe the footprints 
in the sand. For of all the beings that our senses give us 
knowledge of, man is the only one that in himself has the 
power of adapting means to ends by taking thought. 

Yet, so soon as man looks out, he finds in the world 
itself evidences of the same power of adapting means to 
ends that characterize his own works. Hence, recognizing 
in the sum of perceptible things— exclusive of himself, or 
rather of his essential principle or ego, but inclusive, not 
merely of his bodilj^, but also of his mental frame — a system 
or whole, composed of related parts, he personifies it in 
thought and calls it Nature. 



54 THE MEANING OF POLITICAL ECONOMY. BooTi. I. 

Still, while we personify this, whicli is to our apprehen- 
sion the greatest of systems, and give to it in our English 
speech the feminine gender, it is, I think, as sailors per- 
sonify a ship, or engine-drivers a locomotive. That is to 
say, the general perception of the sum of related parts or 
system, that we call Natui-e, does not include the idea of 
the originating will, or fii'st or final cause of all. That, 
we conceive of as something essentially distinct from 
Nature, though animating Nature, and give it another 
name, such as Great Spirit, or Creator, or God. Those 
who contend that Nature is all, and that there is nothing 
above or beyond or superior to Nature, do so, I think, by 
confounding two distinct conceptions, and using the word 
Nature as meaning what is usually distinguished by the 
word God. 

We all, indeed, frequently use the word Natiu-e to 
avoid the necessity of naming that which we feel to be 
unnamable, in the sense of being beyond our comprehen- 
sion, and therefore beyond our power of defining. Yet I 
think that not merely the almost universal, but the clearest, 
and therefore best, perceptions of mankind, really dis- 
tinguish what we call Nature from what we call God, just 
as we distinguish the ship, or other machine, that we per- 
sonifj'', from the wdll which we recognize as exerted in its 
origination and being ; and that at the bottom oui' idea is 
that of Pope : 

All are but parts of one stupendous whole, 
Wliose body Nature is, and God the soul. 

It is from this conception of Nature as expressing or as 
animated by the highest will, that we derive, I think, the 
term "law of Nature." 

We come here to another instance of the application to 
greater things of names suggested by the less. In original 
meaning, the word law refers to human will, and is the 



Chap. VII. OP THE LAWS OF NATURE. 55 

uaiiic given to a coinmaud or rule of conduct imposed 
by a superior upon an inferior, as by a sovereign or state 
upon those subject to it. At first the word law doubtless 
referred only to human law. But when, later in intellec- 
tual development, men came to note invariable coexis- 
tences and sequences in the relations of external things, 
they were, of the mental necessity ah-eady spoken of, com- 
pelled to assume as cause a will superior to human will, 
and adapting the word they were wont to use for the 
highest expression of human will, called them laws of 
Nature. 

Whatever we observe as an invariable relation of things, 
of which in the last analysis we can affirm only that " it 
is always so," we call a law of Nature. But though we use 
this phrase to express the fact of invariable relation, 
something more than this is suggested. The term itself 
involves the idea of a causative will. As John Stuart Mill, 
trained to analysis from infancy, and from infancy exempt 
from theological bias, says : 

The expression "law of Nature" is generally employed by scientific 
men with a sort of tacit reference to the original sense of the word 
law, namely, the expression of the will of a superior— the superior, 
in this instance, being the Ruler of the universe. 

Thus, then, when we find in Nature certain invariable 
sequences, whose cause of being transcends the power of 
the will testified to by our own consciousness— such, for 
instance, as that stones and apples always fall towards the 
earth ; that the square of a hypothenuse is alwaj's equal to 
the sum of the squares of its base and perpendicular ; that 
gases always coalesce in certain definite proportions ; that 
one pole of the magnet always attracts what the other 
always repels ; that the egg of one bird subjected to a 
certain degree of warmth for a certain time brings forth a 
chick that later will clothe itself with plumage of a certain 



56 THE MEANING OF POLITICAL ECONOMY. BooT<. I. 

kind and color, and the Qgg of another bird under the same 
conditions brings forth a chick of a different kind ; that at 
a certain stage of infancy teeth appear, and later decay and 
drop out ; and so on through the list of invariable sequences 
that these will suggest— we say, for it is really all that we 
can say, that these sequences are invariable because they 
belong to the order or system of Nature ; or, in short, that 
they are '' laws of Nature." 

The dog and cow sometimes look wise enough to be 
meditating on anything. If they really could bother their 
heads with such matters or express their ideas in speech, 
they would probably say that such sequences are invari- 
able, and then rest. But man is impelled by his endow- 
ment of reason to seek behind fact for cause. For that 
something cannot come from nothing, that every conse- 
quence implies a cause, lies at the very foundation of our 
perception of causation. To deny or ignore this would be 
to cease to reason — which we can no more cease in some 
sort of fashion to do than we can cease to breathe. 

Thus, whether civilized or uncivilized, man is compelled, 
of mental necessity, to look for cause beneath the phe- 
nomena that he begins really to consider, and no matter 
what intermediate cause he may find, cannot be content 
until he reaches will and finds or assumes intent. This 
necessity is universal to human nature, for it belongs to 
that quality or principle of reason which essentially dis- 
tinguishes man from the brute. The notion that— 

The heathen in his blindness, 
Bows down to wood and stone, 

is of the real ignorance of pretended knowledge. Beneath 
the belief of the savage in totems and amulets and charms 
and witchcraft lurks the recognition of spirit; and the 
philosophies that have hardened into grotesque forms of 
religion contain at bottom that idea of an originating wiU 



Chap.VII. OF THE LAWS OF NATURE. 57 

which the Hebrew Scriptures express iu their opening 
sentence : " In the beginning Grod created the heaven and 
the earth." 

To such recognition of will or spirit, reason, as it 
searches from effect for cause, must come before it can 
rest content. Beyond this, reason cannot go. Why is it 
that some things always coexist with other things? and 
that some things always follow other things? The Mo- 
hammedan will answer : " It is the will of God." The man 
of our Western civilization will answer : '' It is a law of 
Nature." The phi-ase is different, but the answer one. 



CHAPTER VIII. 

OF THE KNOWLEDGE PROPERLY CALLED 
^ SCIENCE. 

SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OF NA- 
TURE, AND THAT IN THE CURRENT POLITICAL ECONOMY 
THIS HAS BEEN FORGOTTEN. 

Proper meaning of science— It investigates laws of natm-e, not 
laws of man— Distinction between the two— Their confusion in 
the current political economy— Mason and Lalor's "Primer of 
Political Economy" quoted— Absurdity of this confusion- Tur- 
got on the cause of such confusions. 

SCIENCE is a word much abused just now, when all 
sorts of pretenders to special knowledge style them- 
selves scientists and aU sorts of ill- verified speculations are 
caUed sciences ; yet it has a weU-defined, proper meaning 
which may easily be kept in mind. Literally, the word 
science means knowledge, and when used to distinguish 
a particular kind of knowledge, should have the meaning 
of the knowledge— that is, of the highest and deepest 
knowledge. This is, indeed, the idea which attaches to 
the word. In its proper and definite meaning, science 
does not include all knowledge or any knowledge, but that 
knowledge by or in which results or phenomena are related 
to what we assume to be their cause or sufficient reason, 
and call a law or laws of nature. 

58 



Chap. VII I. KNOWLEDGE PROPERLY CALLED SCIENCE. 59 

As the knowledge we call skill is that part of knowledge 
which comes closest to the individual, being retained in 
the subconscious memory, and hence nearly or completely 
incommunicable ; so, on the contrary, science properly so 
called is that part of knowledge which comes closer to the 
higher faculty of reason, being retained in the conscious 
memory, and hence most easily and completely commu- 
nicable through the power of speech in which reason finds 
expression, and through the arts that are extensions of and 
subservient to speech, such as writing, printing and the 
like. Something of skill even animals may acquire. 
Trained dogs, trained goats, trained monkeys and trained 
bears are common, and even what are called trained fleas 
are exhibited. But it is impossible to teach an animal 
science, since animals lack the causal faculty by which 
alone science is apprehended. It is in youth, when the 
joints are most flexible and the muscles most supple, that 
skill is most readily acquired. But it is in the years that 
bring the contemplative mind that we most appreciate and 
best acquire science. And so, while the advantages of 
civilization do not imply increased skill, they do imply the 
extension of science. 

With human laws what is properly called science has 
nothing whatever to do, unless it be as phenomena which 
it subjects to examination in the effort to discover in 
natural law their cause. Thus there may be a science of 
jurisprudence, or a science of legislation, as there may be 
a science of grammar, a science of language, or a science 
of the mental structure and its operations. But the object 
of such sciences, properly so called, is always to discover 
the laws of nature in which human laws, customs and 
modes of thought originate— the natm*al laws which lie 
behind and permanently affect, not merely all external 
manifestations of human will, but even the internal affec- 
tions of that will itself. 



60 THE MEANING OF POLITICAL ECONOMY. Booh I. 

Human laws are made by man, and share in all his 
weaknesses and frailties. They must be enforced by 
penalties subsequent to and conditioned upon their viola- 
tion. Such penalties are called sanctions. Unless ac- 
companied by some penalty for its violation, no act of 
legislative body or sovereign prince becomes law. Lack- 
ing sanction, it is merely an expression of wish, not a 
declaration of will. Human laws are acknowledged only 
by man ; and that not by all men in all times and places, 
but only by some men— that is, by men living in the time 
and place where the pohtical power that imposes them has 
the ability to enforce their sanctions ; and not even by all 
of these men, but generally by only a very small part of 
them. Limited to the circumscribed areas which we call 
political divisions, they are even there constantly fluctuat- 
ing and changing. 

Natural laws, on the other hand, belong to the natural 
order of things ; to that order in which and by which not 
only man himself but all that is, exists. They have no 
sanctions in the sense of penalties imposed upon their 
violation, and enforced subsequent to their violation ; they 
cannot be violated. Man can no more resist or swerve a 
natural law than he can build a world. They are acknow- 
ledged not only 'by all men in all times and places, but also 
by all animate and all inanimate things; and their sway 
extends not merely over and throughout the whole earth 
of which we are constantly changing tenants, but over and 
through the whole sj^stem of which it is a part, and so far 
as either observation or reason can give us light, over and 
through the whole universe, visible or invisible. So far 
as we can see, either by observation or by reason, they 
know not change or the shadow of turning, but are the 
same— yesterday, to-day, to-morrow ; for they are expres- 
sions, not of the mutable will of man, but of the immutable 
will of God. 



Chap. VIII. KNOWLEDGE PROPEELY CALLED SCIENCE. 01 

I dwell again on the distinction between laws of nature 
and laws of man, because it is of the first necessity in be- 
ginning the study of political economy that we should 
grasp it firmly and keep it clearly in mind. This necessity 
is the greater, since we shall find that in the accredited 
economic treatises laws of nature and laws of man are 
confused together in what they call laws of political 
econoui}'. 

It is not worth while to make many quotations to show 
a confusion which one may see by taking up the economic 
work approved by college or university that fii'st comes to 
his hand ; but that what passes in these institutions for 
the science of political economy may speak for itself, I 
shall make one quotation. 

I take for that purpose the best book I can find that puts 
into compact form the teachings of the scholastic econo- 
mists — one that is, I think, superior in this to Mrs. Millicent 
Garrett Fawcett's "Political Economy for Beginners," 
which at the time I wi'ote " Progress and Poverty " seemed 
to me the best short statement of accepted economic teach- 
ings I then knew of. It is " The Primer of Political Econ- 
omy, in Sixteen Definitions and Forty Propositions," by 
Alfred B. Mason and John J. Lalor (Chicago, A. C. McClurg 
& Co.).* Messrs. Mason and Lalor, who have since proved 
themselves to be men of abihty, were in 1875, when they 
wrote the primer, fresh from a university course of political 
economy and a subsequent study of the approved authori- 
ties, and their primer has been widely indorsed and largely 
used in institutions of learning. This is the first of their 
sixteen definitions, and their explanation of it : 



* In writing this book I have vainly tried to find some such con- 
densation that would do for the "new-school " scholastic economy 
what Mrs. Fawcett and Messrs. Mason and Lalor have done for the 
old, and can only conclude that its teachings are too vague to permit 
of such condensation. 



62 THE MEANING OF POLITICAL ECONOMY. Booh I. 

DEFINITION I.— Political Economy is the Science which teaches 
the laws that regulate the Production, Distribution and Exchange 
of Wealth. 

Everything in this world is governed by law. Human laws are 
those made by man. All others are natural laws. A law providing 
for the education of children in schools is a human law. The law 
that children shall keep growing, if they live, until they are men and 
women, and shall then slowly decay and at last die, is a natural law. 
An apple falls from a tree and the earth moves around the sun in 
obedience to natural laws. The laws which regidate the production, 
distribution and exchange of wealth are of both kinds. The more 
important ones, however, are natural. 

In this Messrs. Mason and Lalor aptly illustrate the 
essential difference between natural law and human law. 
But the way in w^hich the two are mixed together as eco- 
nomic laws suggests the examination-paper of a Philadel- 
phia boy more interested in hooking catfish and stoning 
frogs than in Lindley Murray. To the question, '' Name 
and describe nouns ? " the answer was : 

Nouns are three in number and sometimes more. There are 
proper nouns, common nouns, bloody nouns * and other nouns. 
Proper nouns are the projierest nouns, but common nouns are the 
commonest. Bloody nouns are the big ones. Other nouns are no 
good. 

Yet ridiculous as is this confusion of human law and 
natural law, and absurd as is a definition that leaves one 
to guess which is meant by '' laws," this little primer cor- 
rectly gives what is to be found in the pretentious treatises 
it endeavors to condense— and that even in the most 
systematic and careful of tliem, as I shall hereafter have 
occasion to show. 

It is only with the implication that by law is meant 
natural law, that we can say, "Everything in tliis world is 

* A name given by boys in Philadelphia to large bullfrogs. 



Chafp. nil. KNOWLEDGE PROPERLY CALLED SCIENCE. 63 

governed by law." To say, as the little summary of the 
scholastic political economy from which I have quoted 
says, that political economy is the science which teaches 
the laws, some of them natural laws and some of them 
human laws, which regulate the production, distribution 
and exchange of wealth, is like saying that astronomy is 
the science which teaches the laws, some of them laws of 
matter and motion and some of them Bulls of Popes and 
Acts of Parliament, which regulate the movements of stars 
and comets. 

The absurdity of this is not so strikingly obvious in the 
ponderous treatises from which it is derived as in this little 
primer, because the attention of the reader is in them con- 
fused by the utter want of logical arrangement, and dis- 
tracted by the shovehng in on him, as it were, of great 
masses of irrelevant matter, which makes it a most difficult, 
and with the majority of readers an utterly hopeless task | 
to dig out what is really meant— a task usually abandoned \ 
by the ordinary reader with a secret feehng of shame at \ 
his own incapacity to follow such deep and learned men, 
who seem hghtly to revel in what he cannot understand. 
The expositions of what passes for the science of political 
economy in our schools do indeed for the most part con- 
tain some things that really belong to science. But in far 
larger part what properly belongs to science is, in the 
literature of political economy that has grown up since 
his time, confused and overlaid with what Turgot, over a 
hundred years ago, spoke of as an art— the art, namely, 
" of those who set themselves to darken things that are 
clear to the open mind." 

What this trulj'- great Frenchman of the eighteenth cen- 
tmy said is worth quoting, for it finds abundant and con- 
stant illustration in the writings of the professors of 
political economy of the nineteenth century, and especially 
in the latest of them : 



64 THE MEANING OF POLITICAL ECONOMY. BoolcL 

This art consists in never beginning at the beginning, but in rush- 
ing into the subject in all its complications, or with some fact that 
is only an exception, or some circumstance, isolated, far-fetched or 
merely collateral, which does not belong to the essence of the ques- 
tion and goes for nothing in its solution. . . . Like a geometer who 
treating of triangles should begin with white triangles as most sim- 
ple, in order to treat afterwards of blue triangles, then of red trian- 
gles, and so on. 

If political economy is a science— and if not it is hardly- 
worth the while of earnest men to bother themselves with 
it— it must foUow the rules of science, and seek in natural 
law the causes of the phenomena which it investigates. 
With human law, except as furnishing illustrations and 
supplying subjects for its investigation, it has, as I have 
already said, nothing whatever to do. It is concerned 
with the permanent, not with the transient ; with the laws 
of nature, not with the laws of man. 



CHAPTER IX. 
THE ECONOMY CALLED POLITICAL ECONOMY. 

SHOWING THE MEANING, UNITS AND SCOPE OF POLITICAL 
ECONOMY. 

The word economy— The word political— Origin of the term "political 
economy" and its confusions — It is not concerned with the body 
politic, but with the body economic— Its units, and the system or 
arrangement of which it treats — Its scope. 

THE word economy, drawn from two Greek words, 
house and law, wliicli together signify the manage- 
ment or arrangement of the material part of household 
or domestic affaii'S, means in its most common sense the 
avoidance of waste. "We economize money or time or 
strength or material when we so arrange as to accomplish 
a result with the smallest expenditure. In a wider sense 
its meaning is that of a system or arrangement or adapta- 
tion of means to ends or of parts to a whole. Thus, we 
speak of the economy of the heavens ; of the economy of 
the solar sj^stem ; the economy of the vegetable or animal 
kingdoms ; the economy of the human body ; or, in short, 
of the economy of anything which involves or suggests the 
adaptation of means to ends, the coordination of parts in 
a whole. 

As there is an economy of individual affairs, an economy 
of the household, an economy of the faim or workshop 
or railway, each concerned with the adaptation in these 

65 



66 THE MEANING OF POLITICAL ECONOMY. Booh I. 

spheres of means to ends, by whicli waste is avoided and 
the largest results obtained mtli the least expenditure, so 
there is an economy of communities, of the societies in 
which civilized men live — an economy which has special 
relation to the adaptation or system by which material 
wants are satisfied, or to the production and distribution 
of wealth. 

The word political means, relating to the body of citi- 
zens or state, the body politic ; to things coming within the 
scope and action of the commonwealth or government ; to 
public policy. 

Political economy, therefore, is a particular kind of 
economy. In the hteral meaning of the words it is that 
kind of economy which has relation to the communit}^ or 
state ; to the social whole rather than to individuals. 

But the convenience which impels us to abbreviate a 
long term has led to the frequent use of " economic " when 
" pohtico-economic " is meant, so that we may by usage 
speak of the literature or principles or terms of political 
economy as "economic literature," or "economic princi- 
ples," or " economic terms." Some recent writers, indeed, 
seem to have substituted the term " economics " for politi- 
cal economy itself. But this is a matter as to which the 
reader should be on his guard, for it has been used to make 
what is not really political economy pass for political econ- 
omy, as I shall hereafter show. 

Adam Smith, who at the close of the last century gave 
so powerful an impulse to the study of what has since been 
called political economy that he is, not without justice, 
spoken of as its father, entitled his great book, "An 
Inquiry into the Nature and Causes of the "Wealth of 
Nations ;" and what we call political economy the Germans 
call national economy. 

No term is of importance if we rightly understand what 
it means. But, both in the term " political economy," and 



CJia27. IX. ECONOMY CALLED POLITICAL ECONOMY. 67 

in that of "national economy/' as well as in the phrase 
" wealth of nations," lurk suggestions which may and in 
fact often do interfere with a clear apprehension of the 
ground they properly cover. 

The use of the term '' pohtical economy " began at a time 
when the distinction between natural law and human law 
was not clearly made, when what I have called the body 
economic was largely confounded with what is properly 
the body politic, and when it was the common opinion in 
Europe, even of thoughtful men, that the produ<ition and 
distribution of wealth were to be regulated by the legisla- 
tive action of the sovereign or state. 

The first one to use the term is said to have been 
Antoiue de Montchretien in his "Treatise on Political 
Economy " (" Traite de Peconomie politique "), published in 
Rouen, France, 1615. But if not invented by them, it was 
given currenc}^, some 130 or 140 years after, by those 
French exponents of natural right, or the natural order, 
who may to-day be best described as the first single-tax 
men. They used the term "political economy" to distin- 
guish from politics the branch of knowledge with which 
they were concerned, and from this called themselves 
Economists. The term is used by Adam Smith only in 
speaking of " this sect," composed of " a few men of great 
learning and ingenuity in France." But although these 
Economists were overwhelmed and have been almost for- 
gotten, yet of their "'noble and generous system" this 
term remained, and since the time of Adam Smith it has 
come into general use as expressive of — to accept the most 
common and I think sufficient definition — that branch of 
knowledge that treats of the nature of wealth, and the lav/s 
of its production and distribution. 

But the confusion with politics, wliich the Frenchmen 
of whom Adam Smitli speaks endeavored to clear away 
by their adoption of the term "political economy," still con- 



68 THE MEANING OF POLITICAL ECONOMY. Booh L 

tinues, and is in fact suggested by the term itself, which 
seems at first apt to convey the impression of a particular 
kind of politics rather than of a particular kind of econ- 
omy. The word political has a meaning Avhich relates it 
to civil government, to the exercise of human sovereignty 
by enactment or administration, without reference to those 
invariable sequences which we call natural laws. An area 
differentiated from other areas with reference to this 
power of making municipal enactments and compelling 
obedience to them, we style a political division ; and the 
larger political divisions, in which the highest sovereignty 
is acknowledged, we call nations. It is therefore impor- 
tant to keep in mind that the laws with which political 
economy primarily deals are not human enactments or 
municipal laws, but natural laws; and that they have 
no more reference to political divisions than have the 
laws of mechanics, the laws of optics or the laws of gravi- 
tation. 

It is not with the body politic, bnt with that body social 
or body industrial that I have called the body economic, 
that political economy is directly concerned ; not with the 
commonwealth of which a man becomes a member by the 
attribution or acceptance of allegiance to prince, potentate 
or republic; but with the commonwealth of which he be- 
comes a member by the fact that he lives in a state of 
society in which each does not attempt to satisfy all of his 
own material wants by his own direct efforts, but obtains 
the satisfaction of some of them at least through the 
cooperation of others. The fact of participation in tliis 
cooperation does not make him a citizen of any particular 
state. It makes him a civilized man, a member of the 
civilized world— a unit in that body economic to which 
our political distinctions of states and nations liave no 
more relation than distinctions of color have to distinctions 
of form. 



C/irtj). IX. ECONOMY CALLED POLITICAL ECONOMY. 69 

Tlie unit of human life is the individual From our first 
consciousness, or at least from our first memory, our 
deepest feeling is, that what we recognize as "I" is some- 
thing distinct from all other things, and the actual merge- 
ment of its individuality in other individualities, however 
near and dear, is something we cannot conceive of. But 
the lowest unit of which political economy treats often 
includes the family with the individual. For though 
isolated individuals may exist for a while, it is only under 
unnatural conditions. Human life, as we know it, begins 
with the conjuncture of individuals, and even for some 
time after birth can continue to exist only under conditions 
which make the new individual dependent on and subject 
to preceding individuality ; while it requires for its fullest 
development and highest satisfactions the union of indi- 
viduals in one economic unit. 

While, then, in treating of the subject-matter of political 
economy, it will be convenient to speak of the units we 
shall have occasion to refer to a>^ individuals, it should be 
understood that this term does not necessarily mean sepa- 
rate persons, but includes, as one, those so bound together 
by the needs of family life as to have, as our phrase is, 
'' one purse." 

An economy of the economic unit would not be a polit- 
ical economy, and the laws of which it would treat would 
not be those with which political economy is concerned. 
They would be the laws of personal or family conduct. 
An economy of the individual or familj^ could treat the 
production of wealth no fui'ther than related to the pro- 
duction of such a unit. And though it might take cog-- 
nizance of the physical laws involved in its agriculture and 
mechanics, of the distribution of wealth in the economic 
sense it could not treat at all, since any apportionment 
among the members of such a family of wealth obtained 
by it would be governed by the laws of individual or family 



70 THE MEANING OF POLITICAL ECONOMY. BooTc I. 

life, and not by any law of the distribution of the results 
of socially conjoined effort. 

But when in the natural course of human growth and 
development economic units come into such relations that 
the satisfaction of material desires is sought by conjoined 
effort, the laws which political economy seeks to discover 
begin to appear. 

The sj'stem or arrangement by which in such conditions 
material satisfactions are sought and obtained may be 
roughly likened to a machine fed by combined effort, and 
producing joint residts, which are finally divided or dis- 
tributed in individual satisfactions— a machine resem- 
bling an old-time grist-mill to which individuals brought 
separate parcels of grain, receiving therefrom in meal, not 
the identical grain each had put in, nor yet its exact equiva- 
lent, but an equivalent less a charge for milling. 

Or to make a closer illustration ; The system or arrange- 
ment which it is the proper purpose of political economy 
to discover may be likened to that system or arrangement 
by which the physical body is nourished. The lowest unit 
of animal life, so far as we can see, is the single cell, which 
sucks in and assimilates its own food ; thus dh'ectly satis- 
fying what we may style its own desires. But in those 
highest forms of animal life of which man is a type, myr- 
iads of cells have become conjoined in related parts and 
organs, exercising different and complex functions, which 
result in the procurement, digestion and assimilation of 
the food that nourishing each separate cell maintains the 
entire organism. Brain and stomach, hands and feet, 
eyes and ears, teeth and hair, bones, nerves, arteries and 
veins, still less the cells of which all these parts are com- 
posed, do not feed themselves. Under the government of 
the brain, what the hands, aided by the legs, assisted \)j 
the organs of sense, procure, is carried to the mouth, mas- 
ticated by the teeth, taken by the throat to the alembic of 



Chap. IX. ECONOMY CALLED POLITICAL ECONOMY. 71 

the stomach, where aided by the intestines it is digested, 
and passing into a fluid containing all nutritive substances, 
is oxygenized by the lungs ; and impelled by the pumping 
of the heart, makes a complete circuit of the body through 
a system of arteries and veins, in the course of which 
every part and every cell takes the nutriment it requii-es. 

Now, what the blood is to the physical body, wealth, as 
we shall hereafter see more fully, is to the body economic. 
And as we should find, were we to undertake it, that a 
description of the manner in which blood is produced and 
distributed in the physical body would involve almost, if 
not quite, a description of the entire physical man with all 
his powers and functions and the laws which govern their 
operations ; so we shall find that what is included or in- 
volved in poHtical economy, the science which treats of 
the production and distribution of wealth, is almost, if 
not quite, the whole body social, with all its parts, powers 
and functions, and the laws under which they operate. 

The scope of political economy would be roughly ex- ^ 
plained were we to style it the science which teaches how 
civilized men get a living. Why this idea is sufflciently 
expressed as the production and distribution of wealth will 
be more fully seen hereafter ; but there is a distinction as 
to what is called getting a living that it may be worth 
while here to note. 

We have but to look at existing facts to see that there 
are two ways in which men {i.e., some men) may obtain 
satisfaction of their material desires for things not freely 
supplied to them by nature. 

The fii-st of these ways is, by working, or rendering 
service. 

The second is, by stealing, or extorting service. 

But there is only one way in which man {i.e., men in 
general or all men) can satisfy his material desires— that 
is by working, or rendering service. 



72 THE MEANING OP POLITICAL ECONOMY. Book I. 

For it is manifestly impossible tliat men in general or 
all men, or indeed any but a small minority of men, can 
satisfy their material desires by stealing, since in the 
nature of things working or the rendering of service is the 
only way in which the material satisfactions of desire can 
be primarily obtained or produced. 

Stealing produces nothing ; it only alters the distribution 
of what has already been produced. 

Therefore, however it be that stealing is to be considered 
by an individual economy or by an economy of a political 
division, and with whatever propriety a successful thief 
who has endowed churches and colleges and libraries and 
soup-houses may in such an economy be treated as a public 
benefactor and spoken of as Antony spoke of Caesar- 
He hath brought many captives home to Rome, 
Whose ransoms did the general coffers fill, 

—a true science of political economy takes no cognizance 
of stealing, except in so far as the various forms of it may 
pervert the natural distribution, and thus check the nat- 
ural production of wealth. 

Yet, at the same time, political economy does not con- 
cern itself with the character of the desii-es for which sat- 
isfaction is sought. It has nothing to do, either with the 
originating motive that prompts to action in the satisfac- 
tion of material desires, nor yet with the final satisfaction 
which is the end and aim of that action. It is, so to speak, 
like the science of navigation, which is concerned with the 
means whereby a ship may be carried from point to point 
on the ocean, but asks not whether that ship may be a 
pirate or a missionary barque, what are the exj)ectations 
which may induce its passengers to go from one place to 
another, or whether or not these expectations will be grati- 
fied on their arrival. Political economy is not moral or 




Cliaj). IX. ECONOMY CALLED POLITICAL ECONOMY. 73 

ethical science, nor yet is it political science. It is the 
science of the maintenance and nutriment of the body 
politic. 

Although it will be found incidentally to throw a most 
powerful light upon, and to give a most powerful support 
to, the teachings of moral or ethical science, its proper 
business is neither to explain the difference between right 
and wrong nor to persuade to one in preference to the 
other. And while it is in the same way what may be 
termed the bread-and-butter side of politics, it is directly 
concerned only with the natural laws which govern the 
production and distribution of wealth in the social organ- 
ism, and not with the enactments of the body politic or 
state. 



CHAPTER X. 
THE ELEMENTS OF POLITICAL ECONOMY. 

SHOWING HOW POLITICAL ECONOJIY SHOULD PROCEED AND 
WHAT RELATIONS IT SEEKS TO DISCOVER. 

How to understand a complex system— It is the purpose of such a 
system that political economy seeks to discover— These laws, nat- 
ural laws of human natm'e- The two elements recognized by po- 
litical economy— These distinguished only by reason— Human 
will affects the material world only through laws of nature— It is 
the active factor in all with which political economy deals. 

TO understand a complex machine the best way is first 
to see what is the beginning and what the end of its 
movements, leaving details until we have mastered its gen- 
eral idea and comprehended its purpose. In this way we 
most easily see the relation of parts to each other and to the 
object of the whole, and readily come to understand to the 
minutest movements and appliances what without the clue 
of intention might have hopelessly perplexed us. 

When the safety bicycle was yet a curiositj^ even in the 
towns of England and the United States, an American 
missionary in a far-off station received from an old friend, 
unaccompanied by the letter intended to go with it, a 
present of one of these machines, which for economy in 
transportation had not been set up, but was forwarded in 
its unassembled parts. How these parts were to be put 
together was a perplexing problem, for neither the mission- 

74 



chap. X. THE ELEMENTS OF POLITICAL ECONOMY. 75 

ary himself nor any one he could consult could at first 
imagine what the thing was intended to do, and their 
guesses were of almost everything but the truth, until at 
length the saddle suggested a theory, which was so suc- 
cessfully followed that by the time, months afterwards, 
another ship brought the missing letter, the mission- 
ary was riding over the hard sand of the beach on his 
wheel. 

In the same way an intelligent savage, placed in a great 
industrial hive of our civihzation before some enormous 
factory throbbing and Vv^hirring with the seemingly inde- 
pendent motion of pistons and wheels and belts and looms, 
might, with no guide but his own observation and reason, 
soon come to see the what, the how and the why of the 
whole as a connected device for using the power obtained 
by the transformation of coal into heat in the changing of 
such things as wool, silk or cotton into blankets or piece- 
goods, stockings or ribbons. 

Now the reason which enables us to understand the 
works of man as soon as we discover the reason that has 
brought them into existence, also enables us to interpret 
nature by assuming a like reason in nature. The child's 
question, " What is it for ? "—what is its purpose or intent ? 
—is the master key that enables us to turn the locks that 
hide nature's mysteries. It is in this way that all dis- 
coveries in the field of the natural sciences have been 
made, and this wiU be our best way in the investigation 
we are now entering upon. The complex phenomena of 
the production and distribution of wealth in the elaborate 
organization of modern civilization will only puzzle us, as 
the many confused and confusing books written to explain 
it show, if we begin, as it were, from the middle. But if 
we seek first principles and trace out main lines, so as to 
comprehend the skeleton of tlieir relation, they will readily 
become intelligible. 



76 THE MEANING OF POLITICAL ECONOMY. Boo]< L 

The immense aggregate of movements by which, in 
civilization, wealth is produced and distributed, viewed 
collectively as the subject of political economy, constitute 
a system or arrangement much greater than, yet analogous 
to, the system or arrangement of a great factory. In the 
attempt to understand the laws of nature, which they illus- 
trate and obey, let us avoid the confusion that inevitably 
attends beginning from the middle, by proceeding in the 
way suggested in our illustration— the only scientific way. 

These movements, so various in their modes, and so 
complex in their relations, with which political economy 
is concerned, evidently originate in the exertion of human 
will, prompted by desire ; their means are the material and 
forces that nature offers to man and the natural laws which 
these obey; their end and aim the satisfaction of man's 
material desii^es. If we try to call to mind as many as we 
can of the different movements that are included in the 
production and distribution of wealth in modern civiliza- 
tion — the catching and gathering, the separating and 
combining, the digging and planting, the baking and 
brevfing, the weaving and dyeing, the sewing and washing, 
the sawing and planing, the melting and forging, the 
moving and transporting, the buying and selling — we 
shall see that what they all aim to accomplish is some sort 
of change in the place, form or relation of the materials 
or forces supplied by nature so as better to satisfy human 
desire. 

Thus the movements with which political economy is 
concerned are human actions, having for their aim the 
attainment of material satisfactions. And the laws that it 
is its province to discover are not the laws manifested in 
the existence of the materials and forces of nature that 
man thus utilizes, nor yet the laws which make possible 
their change in place, form or relation, but the laws of 
man's own nature, which affect his own actions in the 



ChajJ.X. THE ELEMENTS OF POLITICAL ECONOMY. 77 

endeavor to satisfy liis desires by bringing about such 
changes. 

The world, as it is apprehended by human reason, is by 
that reason resolvable, as we have seen, into three elements 
or factors— spirit, matter and energy. But as these three 
ultimate elements are conjoined both in what we call man 
and in what we call nature, the world regarded from the 
standpoint of political economy has for its original ele- 
ments, man and nature. Of these, the human element is 
the initiative or active factor— that which begins or acts 
first. The natural element is the passive factor— that 
which receives action and responds to it. From the 
interaction of these two proceed all with which political 
economy is concerned— that is to say, all the changes that 
by man's agency may be wrought in the place, form or 
condition of material things so as better to fit them for 
the satisfaction of his desires. 

Between the material things which come into existence 
through man's agency and those which come into existence 
through the agency of nature alone, the difference is as 
clear to human reason as the difference between a moun- 
tain and a pja-amid, between what was on the shores of 
Lake Michigan when the caravels of Columbus first plowed 
the waters of the Caribbean Sea and the wondrous White 
City, beside which in 1893 the antitypes of those caravels, 
by gift of Spain, were moored. Yet it eludes our senses 
and can be apprehended only by reason. 

Any one can distinguish at a glance, it may be said, 
between a pyramid and a mountain, or a city and a forest. 
But not by the senses uninterpreted by reason. The ani- 
mals, whose senses are even keener than ours, seem inca- 
pable of making the distinction. In the actions of the most 
intelligent dog you will find no evidence that he recognizes 
any difference between a statue and a stone, a tobacconist's 
wooden Indian and the stump of a tree. And things are 



78 THE MEANING OF POLITICAL ECONOMY. Book L 

now manufactured and sold as to which it requires an 
expert to tell whether they are products of man or products 
of nature. 

For the essential thing that in the last analysis distin- 
guishes man from nature can, on the material plane that 
is cognizable by the senses, appear only in the garb and 
form of the material. Whatever man makes must have 
for its substance preexisting matter ; whatever motion he 
exerts must be drawn from a preexisting stock of energy. 
Take away from man all that is contributed by external 
nature, all that belongs to the economic factor land, and 
you have, what ? Something that is not tangible by the 
senses, yet which is the ultimate recipient and final cause 
of sensation ; something which has no form or substance 
or direct power in or over the material world, but which 
is yet the originating impulse which utilizes motion to 
mold matter into forms it desires, and to which we must 
look for the origin of the pyramid, the caravel, the indus- 
trial palaces of Chicago and the myriad marvels they con- 
tained. 

I do not ^\Tish to raise, or even to refer further than is 
necessary, to those deep problems of being and genesis 
where the light of reason seems to fail us and twilight 
deepens into dark. But we must grasp the thread at its 
beginning, if we are to hope to work our waj- through a 
tangled skein. And into what fatal confusions those fall 
who do not begin at the beginning may be seen in current 
economic works, which treat capital as though it were the 
originator in production, labor as though it were a product, 
and land as though it were a mere agricultural instrument 
— a something on which cattle are fed and wheat and 
cabbages raised, 

"We cannot really consider the beginning of things, so. 
far as a true political economy is forced to concern itself 
with them, without seeing that when man came into the 



Chap. X. THE ELEMENTS OF POLITICAL ^ECONOMY. 79 

world the sum of energy was not increased nor that of 
matter added to ; and that so it must be to-day. In all the 
changes tliat man brings about in the material world, he 
adds nothing to and subtracts nothing from the sum of 
matter and energy. He merely brings about changes in 
the place and relation of what already exists, and the fii'st 
and always indispensable condition to his doing anything 
in the material world, and indeed to his very existence 
therein, is that of access to its material and forces. 

So far as we can see, it is universally true that matter 
and energy are indestructible, and that the forms in which 
we apprehend them are but transmutations from forms 
they have held before ; that the inorganic cannot of itself 
pass into the organic; that vegetable life can only come 
from vegetable life; animal life from animal life; and 
human life from human life. Notwithstanding all specu- 
lation on the subject, we have never yet been able to trace 
the origin of one well-defined species from another well- 
defined species. Yet the way in which we find the orders 
of existence superimposed and related, indicates to us design 
or thought— a something of which we have the fii'st 
glimpses only in man. Hence, while we may explain the 
v/orld of which our senses tell us by a world of which our 
senses do not tell us, a world of what Plato vaguely called 
ideas, or what we vaguely speak of as spirit, yet we are 
compelled when we would seek for the beginning cause 
and still escape negation to posit a primary or all-causative 
idea or spirit, an all-producer or creator, for which our 
short word is God. 

But to keep within what we do know. In man, con- 
scious will— that which feels, reasons, plans and contrives, 
in some way that we cannot understand- is clothed in 
material form. Coming thus into control of some of the 
energy stored up in our physical bodies, and learning, as 
we may see in infancy, to govern arms, legs and a few 



80 THE MEANING OF POLITICAL ECONOMY. Booh I. 

other organs, this conscious will seeks through them to 
grasp matter and to set to work, in changing its place and 
form, other stores of energy. The steam-engine rushing 
along with its long train of coal or goods or passengers, 
is in all that is evident to our senses but a new form of 
what previously existed. Everything of it that we can 
see, hear, touch, taste, weigh, measure or subject to chem- 
ical tests, existed before man was. What has brought 
preexisting matter and motion to the shape, place and 
function of engine and train is that which, prisoned in 
the engineer's brain, grasps the throttle; the same thing 
that in the infant stretches for the. moon, and in the child 
makes mud-pies. It is this conscious will seeking the 
gratification of its desires in the alteration of material 
forms that is the primary motive power, the active factor, 
in bringing about the relations with which political econ- 
omy deals. And while, whatever be its origin, this will is 
in the world as we know it an original element, yet it can 
act only in certain ways, and is subject in that action to 
certain uniform sequences, which we term laws of nature. 



CHAPTER XI. 
OF DESIRES AND SATISFACTIONS. 

SHOWING THE WIDTH AND DIPORTANCE OF THE FIELD OF 
POLITICAL ECONOMY. 

Action springs from desire and seeks satisfaction— Order of desires- 
Wants or needs— Subjective and objective desires— Material and 
immaterial desires— The Merarcliy of life and of desires. 

A LL human actions— at least all conscious and voluntary 
XjL actions— are prompted by desii-e, and have for their 
aim its satisfaction. It may be a desire to gain something 
or a desire to escape something, as to obtain food or to 
enjoy a pleasing odor, or to escape cold or pain or a noi- 
some smell ; a desire to benefit or give pleasure to others, 
or a desire to do them harm or give them pain. But 
whether positive or negative, physical or mental, benefi- 
cent or injurious, so invariably is desire the antecedent 
of action that when oui* attention is called to any human 
action we feel perplexed if we do not recognize the ante- 
cedent desire or motive, and at once begin to look for it, 
confident that it has to the action the relation of cause to 
effect. 

So confident, indeed, are we of this necessary causal 
relation between action and desire, that when we cannot 
find, or at least mth some plausibility surmise, an ante- 
cedent desii'e of which the action is an expression, we will 
not believe that the action took place, or at the least, wiU 

81 



82 THE MEANING OF POLITICAL ECONOMY. Booh I. 

not believe that it was a voluntary, conscious action, but 
will assume, as the older phraseology put it, that the man 
was possessed by some other human or extra-human will ; 
or, as the more modern phrase puts it, that he was insane. 
For so unthinkable is conscious, voluntary action without 
antecedent desire, that we will reject the testimony of 
others or even the testimony of our ovm senses rather than 
believe that a conscious act can take place vv^ithout motive. 

And as desire is the prompter, and the satisfaction of 
desire is the end and aim, of all human action, all that men 
seek to do, to obtain or to avoid may be embraced in one 
term, as satisfactions, or satisfactions of desire. 

But of these desu'es and their corresponding satisfac- 
tions, some are more primary or fundamental than others ; 
and it is only as these desires obtain satisfaction that other 
desires arise and are felt. Thus the desire for air is per- 
haps the most fundamental of all human desires. Yet its 
satisfaction is under normal conditions so easily had that 
we usually are not conscious of it — it is in fact rather a 
4atent than an actual desire. But let one be shut off from 
air, and the desire to get it becomes at once the strongest 
of desires, casting out for the moment all others. So it is 
with other desires, such as those for food and drink, the 
satisfaction of which is necessary to the maintenance of 
life and health and the avoidance of injury and pain, and 
which we share in common with the brute. These primary 
desires lie as it were beneath, or are fundamental to, the 
manifold desires which arise in man when they are satis- 
fied. For, while the desires of other animals seem com- 
paratively speaking few and fixed, the desires of man are 
seemingly illimitable. He is indeed the never-satisfied 
animal ; his desires under normal conditions growing with 
his power of satisfying them, without assignable limit. 

In the same way as we distinguish between necessities 
and luxuries, so do we often distinguish between what we 



Cha2). XL OF DESIRES AND SATISFACTIONS. 83 

call " wants " or " needs " and what we speak of simply as 
desires. The desires whose satisfaction is necessary to 
the maintenance of life and health and the avoidance of 
injury and pain — those desires, in short, which come 
closest to the merely animal plane— we are accustomed to 
call "wants" or "needs." At least this is the primary 
idea, though as a matter of fact we often speak of needs 
or wants in accordance with that usual standard of comfort 
which we call reasonable, and which is in a large degree 
a matter of habit. And thus while the satisfaction of 
desire of some kind is the end and aim of all human 
action, we recognize, though vaguely, a difference in rel- 
ative importance when we say that the end and aim of 
human effort is the satisfaction of needs and the gratifica- 
tion of desires. 

Without desire man could not exist, even in his animal 
frame. And those Eastern philosophies, of which that of 
Schopenhauer is a Western version, that teach that the 
wise man should seek the extinction of all desire, also 
teach that such attainment would be the cessation of in- 
dividual existence, which they hold to be in itself an evil. 
But in fact, as man develops, rising to a higher plane, his 
desires infallibly increase, if not in number at least in 
quality, becoming higher and broader in their end and aim. 

Now, of human desires and their corresponding satis- 
factions, some may be subjective, that is, relating to the 
individual mind or thinking subject ; and some objective, 
that is, relating to the external world, the object of its 
thought. And by another distinction, some may be said 
to be immaterial, that is, relating to things not cognizable 
by the senses, i.e., thought and feehng ; and some to be 
material, that is, relating to things cognizable by the 
senses, i.e., matter and energy. 

There is a difference between these two distinctions, but 
practically it is not a large one. A subjective desire— as 



84 THE MEANING OF POLITICAL ECONOMY. BoolcL 

when I desire greater love or greater knowledge or hap- 
piness for and in my own mind — is always an immaterial 
desire. But it does not follow that an objective desire is 
always a material desire, since I may desire greater love 
or knowledge or happiness for and in the mind of another. 
Yet we have to remember: 1. That much that we are 
prone to consider as immaterial seems to be so only be- 
cause the words we use involve a purely ideal abstraction 
of qualities from things they qualify, and without which 
they cannot exist as things really conceived. Love, 
knowledge or happiness presupposes sometliing which 
loves, knows or feels, as whiteness presupposes a thing 
which is white. 2. That while such qualities as love, 
knowledge or happiness may be predicated of objective 
though immaterial things, yet, normall}^ at least, we can 
have no cognizance of such an immaterial thing, or of its 
states or conditions, except through the material. De- 
prived of the senses of sight, sound, touch, taste and smell, 
the gates through which the ego becomes conscious of the 
material world, how, in any normal way, could I or j^ou 
know of the love, knowledge, happiness or existence of any 
other such being? Except, indeed, there be some direct 
way in which spirit may have knowledge of spirit — a way 
it may be that is opened when that through the material 
by the gates of the senses is closed— the exclusion of the 
material is therefore a practical exclusion of the objective. 
I speak of this for the purpose of showing how nearly 
the field of material desires and satisfactions, within which 
the sphere of political economy lies, comes to including all 
human desires and satisfactions. And when we consider 
how in man the subjective is bound in with the objective, 
the spiritual with the material, the importance of material 
desires and satisfactions to human life as a whole is even 
clearer. For though we may be forced to realize, as the 
innermost essential of mDu, a something that is not 
material ; yet this spirit or soul, as in this life we know it, 



Chap. XL OF DESIRES AND SATISFACTIONS. 85 

is incased and imprisoned in matter. Even if subjective 
existence be possible without the body, the ego as we know 
it, deprived of touch with matter through the senses, would 
be condemned to what may be likened to solitary impris- 
onment. 

As vegetable life is built, so to speak, upon inorganic 
existence, and the animal may be considered as a self- 
moving plant, plus perhaps an animal soul ; so man is an 
animal plus a human soul, or reasoning power. And while, 
for reasons I have touched on, we are driven when we 
think of ultimate origins to consider the highest element 
of which we knov/ as the originating element, yet we are 
irresistibly compelled to think of it as having first laid the 
foundation before raising the superstructure. This is the 
profound truth of that idea of evolution which all theories 
of creation have recognized and must recognize, but which 
is not to be confounded with the materialistic notion of 
evolution vfhich has of late years been popularized among 
superficial thinkers. The wildest imagination never 
dreamed that first of all man came into being ; then the 
animals ; afterwards the plants ; then the earth ; and finally 
the elementary forces. In the hierarchy of life, as we 
know it, the higher is built upon the lower, order on order, 
and is as summit to base. And so in the order of human 
desires, what we call needs come first, and are of the 
widest importance. Desires that transcend the desires of 
the animal can arise and seek gratification only when the 
desires we share with other animals are satisfied. And 
those who are inclined to deem that branch of philosophy 
which is concerned with the gratification of material needs, 
and especially with the way in which men are fed, clothed 
and sheltered, as a secondary and ignoble science, are like 
a general so absorbed in the ordering and moving of his 
forces as utterly to forget a commissariat ; or an architect 
who should deem the ornamentation of a facade more im- 
portant than the laying of a foundation. 



CHAPTER XII. 

THE FUNDAMENTAL LAW OF POLITICAL 
ECONOMY. 

SHOWING THAT THE LAW FROM WHICH POLITICAL ECONOJn^ 
PROCEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES 
WITH THE LEAST EXERTION. 

Exertion followed by weariness— The fact that men seek to satisfy 
their desires with the least exertion— Meaning and analogue — 
Exemplified in trivial things— Is a law of nature and the funda- 
mental law of political economy- Substitution of selfishness for 
this principle— Buckle quoted— Political economy requires no 
such assumption- The necessity of labor not a curse. 

THE only way man has of satisfying his desires is by 
action. 
Now action, if continued long enough in one Hue to 
become really exertion, a conscious putting forth of effort, 
produces in the consciousness a feeling of reluctance or 
weariness. This comes from something deeper than the 
exhaustion of energy in what we call physical labor ; for 
whoever has tried it knows that one may lie on liis back 
in the most comfortable position and by mere dint of sus- 
tained thinking, without consciously moving a muscle, tire 
himself as truly as by sawing wood ; and that the mere 
clash and conflict of involuntary or undirected thought or 
feeling, or its continuance in one direction, wiU soon bring 
extreme weariness, 

86 



Chap. XII. THE LAW OF POLITICAL ECONOMY. 87 

But whatever be its ultimate cause, the fact is that labor, 
the attempt of the conscious will to realize its material 
desire, is always, when continued for a little while, in itself 
hard and irksome. And whether from this fact alone, or 
from this fact, conjoined with or based upon something 
intuitive to our perceptions, the further fact, testified to 
both by observation of our own feelings and actions and 
by observation of the acts of others, is that men always 
seek to gratify their desires with the least exertion. 

This, of course, does not mean that they always succeed 
in doing so, any more than the physical law that motion 
tends to persist in a straight line means that moving 
bodies always take that line. But it does mean the mental 
analogue of the physical law that motion seeks the line of 
least resistance— that in seeking to gratify their desires 
men will always seek the way which under existing physi- 
cal, social and personal conditions seems to them to involve 
the least expenditure of exertion. 

Whoever would see this disposition of human nature 
exemplified in trivial things has only to watch the passers- 
by in a crowded street, or those who enter or depart from 
a frequented house. He will be instructed and perhaps 
not a little amused to note how slight the obstruction 
or semblance of obstruction that will divert their steps ; 
and will see the principle observed by saint and sinner — 
hj '' wicked man on evil errand bent," and " Good Samar- 
itan intent on works of mercy." 

Wliether it proceed from experience of the irksomeness 
of labor and the desire to avoid it, or further back than 
that, have its source in some innate principle of the human 
constitution, this disposition of men to seek the satisfaction 
of their desires with the minimum of exertion is so uni- 
versal and unfailing that it constitutes one of those in- 
variable sequences that we denominate laws of nature, and 
from which we may safely reason. It is this law of nature 



88 THE MEANING OF POLITICAL ECONOMY. Book I. 

that is the fundamental law of political economy— the 
central law from which its deductions and explanations 
may with certainty be drawn, and, indeed, by which alone 
they become possible. It holds the same place in the 
sphere of political economy that the law of gravitation 
does in physics. Without it there could be no recognition 
of order, and all would be chaos. 

Yet the failure clearly to apprehend this as the funda- 
mental law of political economy has led to very serious 
and wide-spread mistakes as to the nature of the science ; 
and has indeed, in spite of the vigorous assertions and 
assumptions of its accredited professors, prevented it from 
truly taking in popular esteem the place of a real science, 
or from long holding in scholastic circles the credit it had 
for a while gained. For the principle that men always 
seek to satisfy their desires with the least exertion, there 
has been substituted, from the time that pohtical economy 
began to claim the attention of thoughtful men, the prin- 
ciple of human selfishness. And with the assumption that 
political economy takes into its account only the selfish 
feelings of human nature, there have been hnked, as laws 
of political economy, other assumptions as destitute of 
validity. 

To show how completely the idea has prevailed that the 
foundation of political economy is the assumption of 
human selfishness, I shall not stop to quote from the 
accredited writers on the subject, nor yet from those who 
have made of it a ground of their repugnance to the 
political economy that has been with justice styled "the 
dismal science "—such as Carlyle, Dickens or Ruskin. I 
take for that purpose a wi-iter who, while he f uUy accepted 
what was at his time (1857-60) the orthodox political econ- 
omy, deeming it " the only subject immediately connected 
with the art of government that has yet been raised to a 
science," and was well conversant with its literature, was 



Chap. XII. THE LAW OF POLITICAL ECONOMY. 89 

not concerned with it as a controversialist, but only as a 
historian of the development of thought. 

Buckle's understanding- of political economy was that 
it eliminated every other feeling than selfishness. In his 
" Inquiry into the Influence Exercised by Rehgion, Litera- 
ture and Government " (Vol. I., Chapter V., of his " History 
of Civilization in England"), he says that in the "Wealth 
of Nations," which he regards as "probably the most 
important book which has ever been written," Smith 
" generalizes the laws of wealth, not from the phenomena 
of wealth, nor from statistical statements, but from the 
phenomena of selfishness; thus making a deductive ap- 
plication of one set of mental principles to the whole set 
of economical facts." 

And in his " Examination of the Scotch Intellect during 
the Eighteenth Century " (Vol. II., Chapter VI.), he returns 
in greater detail to the same subject. Adam Smith, he 
says, wi'ote two great books, with an interval of seventeen 
years between them. In both he employed the same 
method, that form of deduction "which proceeds by an 
artificial separation of facts in themselves inseparable." 
In the first of these, the " Theory of Moral Sentiments," 
he " so narrowed the field of inquiry as to exclude from it 
all consideration of selfishness as a primary principle, and 
only to admit its great antagonist, sympathy." In the 
second, the "Wealth of Nations," which Buckle regards as 
a correlative part of Smith's one great scheme, though still 
greater than its predecessor, Smith, on the contrary, "as- 
sumes that selfishness is the main regulator of human 
aifairs, just as in his previous work he had assumed sym- 
pathy to be so." Or, as Buckle, later on, repeats : 

He evei'ywhere assumes that the great moAnng power of all men, 
all interests and all classes, in all ages and in all countries, is selfish- 
ness. The opposite power of sympathy he entirely shnts out ; and I 
hardly remember an instance in which even the word occurs in the 



90 THE MEANING OF POLITICAL ECONOMY. Boole L 

whole coiu'se of his work. Its fiuidamental assumption is, that each 
man exclusively follows his own interest, or what he deems to be his 
own interest. ... In this way Adam Smith completely changes the 
premises he had assumed in his earlier work. Here, he makes men 
naturally selfish ; formerly, he had made them naturally sympathetic. 
Here, he represents them piu-suing wealth for sordid objects, and for 
the narrowest personal pleasm'es ; formerly, he represented them 
as pursuing it out of regard to the sentiments of others, and for the 
sake of obtaining their sympathy. In the " Wealth of Nations " we 
hear no more of this conciliatory and sjTnpathetic spirit ; such ami- 
able maxims are altogether forgotten, and the affairs of the world 
are regulated by different principles. It now appears that benevo- 
lence and affection have no influence over oiu" actions. Indeed, 
Adam Smith will hardly admit common humanity into his theory of 
motives. If a people emancipate their slaves, it is a proof, not that 
the people are acted on by high moral considerations, nor that their 
sympathy is excited by the cruelty inflicted. on these imhappy crea- 
tures. Nothing of the sort. Such inducements to conduct are 
imaginary and exercise no real sway. All that the emancipation 
proves, is, that the slaves were few in number, and, therefore, small 
in value. Otherwise they would not have been emancipated. 

So, too, while in his former work he had ascribed the different 
systems of morals to the power of sympathy, he, in this work, ascribes 
them entirely to the power of selfishness. 

This presumption, so well stated and defended by- 
Buckle, that political economy must eliminate everything 
but the selfish feelings of mankind, has continued to 
pervade the accredited political economy up to this time, 
whatever may have been the effects upon the common 
mind of the attacks made upon it by those, who, not 
putting their objections into logical and coherent form, 
could be spoken of as sentimentalists, but not pohtical 
economists. Yet, however generally the accepted writers 
on political economy may have themselves supposed the 
assumption of universal selfishness to be the fundamental 
principle of political economy, or how much ground they 
may have given for such a supposition on the part of their 
readers, a true political economy requires no such assump- 



Chap.XII. THE LAW OF POLITICAL ECONOMY. 91 

tion. The primary postulate ou and from which its whole 
structure is built is not that all men are governed only by 
selfish motives, or must for its purposes be considered as 
governed only by selfish motives ; it is that all men seek 
to gratify their desires, whatever those desires may be, 
with the least exertion. This fundamental law of political 
economy is, like all other laws of nature, so far as we are 
concerned, supreme. It is no more affected by the selfish- 
ness or unselfishness of our desires than is the law of 
gra^dtation. It is simply a fact. 

The irksomeness or weariness that inevitably attends 
all continued exertion caused earlier men to look on the 
necessity of labor to production as a penalty imposed upon 
our kind by an offended Deity. But in the light of modern 
civilization we may see that what they deemed a curse is 
in reality the impulse that has led to the most enormous 
extensions of man's power of dealing with nature. So 
true is it that good and evil are not in external things or 
in their laws of action, but in will or spirit. 



CHAPTER XIII. 
METHODS OF POLITICAL ECONOMY. 

SHOWING THE NATURE OF THE METHODS OF INVESTIGATION 
THAT MAY BE USED IN POLITICAL ECONOMY. 

Deductive and inductive schools — "New American Cyclopedia'' 
quoted— Triumph of the inductionists— The' method of induction 
and the method of deduction — Method of hypothesis — Bacon's re- 
lation to induction — Eeal error of the deductionists and the mistake 
of the inductiouists— Lalor's Cyclopedia quoted— Result of the 
triumph of the inductiouists— A true science of political econ- 
omy must follow the deductive method— Davis's "Elements of 
Inductive Logic" quoted— Double assurance of the real postulate 
of political economy — Method of mental or imaginative experiment. 

A MISCONCEPTION of the fundamental law on whicli 
a science is based must lead to divergences and con- 
fusions as the attempt to develop that science proceeds. 

In the case of political economy, the result of the as- 
sumption that its fundamental principle is human selfish- 
ness is shown in disputes and confusions as to its proper 
method. These began shortly after it was recognized as 
deserving the attention of the institutions of learning, and 
are an increasingly noticeable feature in economic litera- 
ture for some sixty or seventy years. Adam Smith and 
the most prominent of his successors followed the deduc- 
tive method. But ere long there began to be questionings 
as to whether the inductive method was not the proper 

92 



Chap. XIII. METHODS OF POLITICAL ECONOMY. 93 

one. Having on their side the weight of authority, the 
defenders of the deductive method, or " oki school" poHti- 
cal economy, as it began to be called, held for a long time 
their formal position, though compelled by the incon- 
gruities of the system they were endeavoring to uphold to 
make damaging deductions and weakening admissioDS; 
while the opposition to them, called by various names, but 
generally known as inductive or " new school" economists, 
gathered strength. 

What lay beneath this contest, which was largely verbal, 
and in which there was confusion on both sides, I shaU 
have occasion to speak of hereafter; but as to how it 
seemed to stand in the scholastic world at the beginning 
of the seventh decade of our century I quote from the 
article " Political Economy " in the "New American Cyclo- 
pedia" (1861), which, as written by an opponent of the 
then orthodox school (Henry Carey Baird), with an evident 
desire to be entirely fair, will I think better show the actual 
situation at that time than anything else I can find : 

The progress thus far made in political economy has been slow and 
imeertain, and there is in its entire range hardly a doctrine or even 
the definition of an important word which is nniversally or even 
generally accepted beyond dispute. . . . Amid all their discords and 
disagreements it is possible to divide political eeonomdsts under two 
general heads : those who treat the subject as a deductive science, 
"in Avhich all the general propositions are in the strictest sense of 
tlie word hj^iothetical ; " and those who treat it by the inductive or 
Baconian method. Of the first-named school are all the English 
economists and most of those of continental Europe who have ac- 
quired any reputation. As the representatives of the last, Mr. Henry 
C. Carey and his followers are most prominent.* 

* As illustrating the looseness with which the words " inductive " 
and " deductive '' have been tlirown around in this discussion as to 
the proper method of political economy, it maybe worth mentioning 
that the same Henry C. Carey, who is here cited as the most promi- 
nent representative of the inductive school, as opposed to the deduc- 



94 THE MEANING OF POLITICAL ECONOMY. Boole I. 

Thus, in 1861, the deductive method, even to the view 
of an adherent of the opposing school, still formally held 
sway in the scholastic world. But at present, as the cen- 
iwcj nears its close, it has so utterly lost its hold that so 
far as I can discover, there is not now a prominent college 
or university anywhere in which the professed teachers of 
what is reputed to be political economy adhere to what 
was then called the deductive method. 

Yet this triumph in scholastic opinion of the advocates 
of what is called the inductive method is in reality but the 
triumph of one set of confusions over another set of con- 
fusions, in which the determining element has been the 
vague consciousness that the previously authoritative 
political economy was not a true political economy. 
Where a new set of confusions is pitted against an old 
set of confusions, the victory must finally and for a time 
remain with the new ; for the reason that on the old lies 
the burden of defending what is indefensible, while the 
new has for a while only the easier task of attack. Wliat 
this passing phase of economic thought really shows is the 
utter confusion into which the whole scholastic political 
economy has fallen from lack of care as to fii'st principles. 
In my view of the matter those who have said that the 
deductive method was the proper method of political econ- 
omy have been right as to that, but wrong in principles 
from which they have made deductions ; while those who 
contended for the inductive method have been wrong as 
to that, but right as to the weaknesses of their opponents. 

As to the course of what has been called the science of 

tive school of Smith, Eieardo and Mill, is in the biographical notice 
of him in the latest successor of the "New American Cyclopedia," 
the revised edition of "Johnson's Universal Cyclopedia" (1895), said 
to be " the founder of a school of political economy whose principles 
are anti-socialistic and more deductive than those of Smith, Ricardo 
and Mill." 



Cha]}. XIII. METHODS OF POLITICAL ECONOMY. 95 

political economy and the destructive revolution which it 
has of late years undergone, I shall have occasion to speak 
in the next book. I am here concerned in clearing only 
what might be a perplexity to the reader in regard to the 
proper methods of the real science. 

The human reason has Uvo ways of ascertaining truth. 
The first of these is that of reasoning from particulars to 
generals in an ascending line, until we come at last to one 
of those invariable uniformities that we call laws of nature. 
This method we call the inductive, or a posteriori. But 
when we have reached what we feel sure is a law of na- 
ture, and as such true in all times and places, then an 
easier and more powerful method of ascertaining truth is 
open to us— the method of reasoning in the descending 
line from generals to particulars. This is the method that 
we call the deductive, or a priori method. For knowing 
what is the general law, the invariable sequence that we 
call a law of nature, we have only to discover that a par- 
ticular comes under it to know what is true in the case of 
that particular. 

In the relation of priority the two methods stand in the 
order in which I have named them — induction being the 
first or primary method of applying human reason to the 
investigation of facts, and deduction being the second or 
derivative. So far as our reason is concerned, induction 
must give the facts on which we may proceed to deduction. 
Deduction can safely be based only on what has been sup- 
plied to the reason by induction ; and where the validity 
of this fii'st step is called in question, must apply to induc- 
tion for proof. Both methods are proper to the careful 
investigation that we speak of as scientific : induction in 
its preliminary stages, when it is groping for the law of 
nature ; deduction when it has discovered that law, and is 
thus able to proceed by a short cut from the general to 
the particular, without any further need for the more 



96 THE MEANINQ OF POLITICAL ECONOMY. BooTcI. 

laborious and, so to speak, uphill method of induction, 
except it may be to verify its conclusions. 

There is a further method of investigation, which con- 
sists in a combination of these two original methods of 
the reason, and which has been found most effective in the 
discovery of truth in the physical sciences. When oui' 
inductions so point to the existence of a natui'al law that 
we are able to form a surmise or suspicion of what it may 
prove to be, we may tentatively assume the existence of 
such a law, and proceed to see whether particulars will fall 
into place in deductions made from it. This is the method 
of tentative deduction, or hypothesis. 

The inductive method is sometimes, as in the last quota- 
tion I have made, spoken of as the Baconian method, and 
the great name of Bacon has been freely used to give 
plausibility to what the advocates of the "new school " in 
political economy have called the inductive method. But 
whatever originality there may have been in his classifica- 
tions and devices. Bacon did not invent the inductive 
method. It was by that method that man's reason has 
from the first enabled him to apprehend laws of natm-e 
that he has subsequently used as bases for deduction. It 
was thus that he must have learned what we are accus- 
tomed to think the simplest of nature's uniformities — such 
as, that after an interval a new moon succeeds the old 
moon ; that the sun, after apparently tending to the south 
for a while, turns again to the north ; that fire will bm-n, 
and that water wUl quench fire. What Bacon did was 
not to invent or discover the inductive method, but to 
formulate some rules for its application and to apply it to 
the investigation of fields of knowledge from which it had 
been long shut out by a blind reliance upon authority— 
by a false assumption that wiser men who had gone before 
had taught all there was worth knomng on certain sub- 
jects, and that there remained for those who came after 



Chap. XIII . METHODS OF POLITICAL ECONOMY. 97 

nothing further to do than to make deductions from 
premises their predecessors had supplied. 

Where the application of the inductive method was 
really needed in what is now called by the ''new lights" 
the ''classical" political economy was to test the premises 
from which its deductions were made, and to clear them 
of what had no better warrant than a disposition to use 
political economy to justify existing social arrangements. 
It was not needed to take the place of the deductive 
method, where that was applicable. For the deductive 
method, when applied to the further extension of what 
has already been validly ascertained, constitutes the most 
powerful means of extending knowledge that the human 
mind can avail itself of. 

In its use of the deductive method after its premises 
had been settled, the classical political economy was not 
in error. The error that gave insecurity to its whole 
structure lay deeper still, in the insufficient inductions on 
which those premises rested. But, instead of addressing 
themselves to these flaws in its accepted premises, the 
various schools of economists generally classed as induc- 
tive have denied that there were any general principles 
that could with certainty be laid down as the basis for 
deduction. Thus, if such a question be asked them as, 
does free trade or protection best promote a general pros- 
perity? or, what is the best system of land-tenure? or, 
what is the best system of taxation ? or, what are the limits 
of governmental interference with industry, or trade-union 
regulations ? no general answer can be given. It can only 
be said that one thing may be best in one place and time, 
and another in another place and time, so that the matter 
can be determined onlj^ by special investigations. In other 
words, to quote the phrase of Professor James, of the 
University of Pennsylvania, an adherent of the "new- 
school " (article, " Political Economy," in Lalor's " Cyclo- 



98 THE MEANING OF POLITICAL ECONOMY. Bool<:. J. 

pedia of Political Science, Political Economy and United 
States History," 1884), they have opposed "the theory 
which seeks eternally valid natural laws in economics, 
•and which considers the natural condition of unlimited 
personal freedom as the only justifiable one, without regard 
to the needs of special times and nations." 

The result, therefore, of the triumph of the " induction- 
ists " over the " deductionists " in the accredited organs of 
economic teaching, has been to destroy in the "new" 
political economy even the semblance of coherency that 
it had in the " old," and to decompose it into a congeries 
of unrelated doctrines and unverified speculations which 
only its professors can presume to understand, and as to 
which they can dispute and quarrel with each other in the 
wild abandon that results from the absence of any recog- 
nized common principle. 

But to me it seems clear that if political economy can 
be called a science at all, it must as a science, that is to 
say from the moment the laws of nature on which it 
depends are discovered, follow the deductive method of 
examination, using induction only to test the conclusions 
thus obtained. For the particulars which are included in 
its province are too vast and too complex to admit of any 
hope of bringing them into order and relation by direct 
induction. 

To quote from the latest elementary text-book of logic 
of which I know, Professor Noah K. Davis's " Elements of 
Inductive Logic " (Harper Bros., New York, 1893), p. 197 : 

The great object of the scientist is to obtain by rigid induction the 
laws of nature, and to follow them by rigid deduction to their conse- 
quences. A science at first wholly inductive becomes, as soon as a 
law has been proved, more or less deductive, and as it progi-esses, 
rising to higher and wider but fewer inductions, the deductive 
processes increase in number and importance, until it is no longer 
proi^evly an inductive, but a deductive science. Thus, hydrostatics, 
acoustics, optics and electricity, commonly called inductive sciences, 



CJuq?. XIII. METHODS OF POLITICAL ECONOMY. 99 

have passed under the dominion of mathematics, from inductive to 
deductive sciences and mechanics has a like history. Celestial 
mechanics as f oimded in the " Principia " of Newton is mainly induc- 
tive, as elaborated in the "Mecanique Celeste" of Laplace, is 
mainly deductive. By pursuing this latter process it has multiplied 
its matter and reached its present high perfection. A revolution is 
quietly progi'essing in all the natural sciences. Bacon changed their 
method from deductive to inductive, and it is now rapidly reverting 
from inductive to deductive. The task of logic is to explicate and 
regulate these methods. 

Now the law of nature which forms the postulate of a 
true science of political economy is not, as has been erro- 
neously assumed, that men are invariably and universally 
selfish. As a matter of fact, this is not true. Nor can we 
abstract from man all but selfish qualities in order to make 
as the object of our thought on economic matters what 
has been called the " economic man," without getting what 
is really a monster, not a man. 

The law of nature which is really the postulate of a true 
science of political economy is that men always seek to 
gratify their desires with the least exertion, whether those 
desires are selfish or unselfish, good or bad. 

That this is a law of nature we have the highest possible 
warrant, wider in fact than we can have for any of the 
laws of external nature, such for instance as the law of 
gravitation. For the laws of external nature can be appre- 
hended only objectively. But that it is a law of nature 
that men seek to gratify their desires with the least exer- 
tion, we may see both subjectively and objectively. Since 
man himseK is included in nature, we may subjectively 
reach the law of nature that men seek to gratify their 
desires with the least exertion, by an induction derived 
from consciousness of our own feelings and an analysis of 
our own motives of action ; while objectively we may also 
reach the same law by an induction derived from obser- 
vation of the acts of others. 



100 THE MEANING OF POLITICAL ECONOMY. Booh I. 

Proceeding from a law of nature thus doubly assured, 
tlie proper method of a political economy which becomes 
really a science by its correct apprehension of a funda- 
mental law, is the method of deduction from that law, the 
method of proceeding from the general to the particular ; 
for this is the method which will enable us to attain incom- 
parably greater results. To abandon that method and 
resort to what the " new lights " of political economy seem 
really to mean by induction, would be as though we were 
to discard the rules of arithmetic and endeavor by direct 
inquiries in all parts of the world to discover how much 
one number added to another would make, and what 
would be the quotient of a sum divided by itself. 

Thus, in the main, the science of political economy re- 
sorts to the deductive method, using induction for its tests. 
But in its more common investigations its most useful 
instrument is a form of hypothesis which n\^y be called 
that of mental or imaginative experiment,* by which we 
may separate, combine or eliminate conditions in our own 
imaginations, and thus test the working of known prin- 
ciples. This is a most common method of reasoning, 
familiar to us all, from our very infancy. It is the great 
working tool of political economj^, and in its use we have 
only to be careful as to the validity of what we assume as 
principles. 

* See lecture delivered by me before the students of the Univer- 
sity of California on "The Study of Political Economy," April, 1877, 
reprinted in "Popular Science Monthly," March, 1880. 



CHAPTER XIV. 

POLITICAL ECONOMY AS SCIENCE AND 
AS ART. 

SHOWING THAT POLITICAL ECONOMY IS PROPERLY A 
SCIENCE, AND THE MEANING IT SHOULD HAVE IP SPOKEN 
OF AS ART. 

Science and art— There must be a science of political economy, but 
no proper art — Wliat must be the aim of an art of political econ- 
omy—White art and black art— Course of further investigation. 

THERE is found among economic writers miicli dis- 
pute not only as to the proper method of ]3olitical 
economj'-, but also as to whether it should be spoken of as 
a science or as an art. There are some who have styled 
it a science, and some who have styled it an art, and some 
who speak of it as both science and art. Others again 
make substantially the same division, into abstract or 
theoretical or speculative political economy, on the one 
side, and concrete or normative or regulative or applied 
political economy, on the other side. 

Into this matter, however, it is hardly worth while for 
us to enter at any length, since the reasons for considering 
a proper political economy as a science rather than an art 
have been already given. It is only necessary to observe 
that where systematized knowledge may be distinguished, 
as it sometimes is, into two branches, science and art, the 

101 



102 THE MEANING OF POLITICAL ECONOMY. Boohl. 

proper distinction between tliem is that the one relates to 
what we call laws of nature ; the other to the manner in 
which we may avail oui'selves of these natural laws to 
attain desired ends. 

This first branch of knowledge, it is clear, is in political 
economy the primary and most important. It is only as 
we know the natural laws of the production and distribu- 
tion of wealth that we can previse the result of the adjust- 
ments and regulations which human laws attempt. And 
as whoever v/ishes to understand and treat the diseases 
and accidents of the human frame would properly begin 
by studying it in its normal condition, noting the position, 
relation and functions of the organs in a state of perfect 
health; so any study of the faults, aberrations and in- 
juries which occur in the economy of "society comes best 
after the study of its natural and normal condition. 
■*"' There may be disputes as to whether there is yet 
science of political economy, that is to say, whether our 
knowledge of the natural economic laws is as yet so large 
and well digested as to merit the title of science. But 
among those who recognize that the world we live in is in 
all its spheres governed by law, there can be no dispute as 
to the possibihty of such a science. 

And as there can be only one science of chemistry, one 
science of astronomy and one science of physiology, which, 
in so far as they are really sciences, must be true and in- 
variable, so, while there may be various opinions, various 
teachings, various hj^potheses (or in a loose and improper 
but exceedingly common use of the word, various theories), 
of political economy, there can be only one science. And 
it, in so far as it is realty a science— that is to say, in so 
far as we have really discovered and related the natiu'al 
laws which are within its province— must in all times and 
places be true and invariable. For we live in a world 
where the same effects always follow the same causes and 



Ckap.Xir. AS SCIENCE AND AS ART. 103 

where notliing is capricious, unless indeed it be that some- 
thing within us which desires, wills and chooses. But this 
in man, that seems, to a certain extent at least, indepen- 
dent of the external nature that is recognized by our 
senses, can manifest itself only in accordance with natural 
laws, and can accomplish its external purposes only by 
using those laws. 

When we shall have worked out the science of political 
economy— when we shall have discovered and related the 
natural laws which govern the production and distribution 
of wealth, we shall then be in position to see the effect of 
human laws and customs. But it does not seem to me 
that a knowledge of the effect which natural laws of the 
production and distribution of wealth bring about in the 
outcome of human laws, customs and efforts, can be 
properly spoken of as an art of political economy, or that 
the knowledge properly classified under the term political 
economy, can be divided, as some writers have attempted 
to divide it, into a science and an art. There is a science 
of astronomy, which has its applications in such arts as 
those of navigation and surveying ; but no art of astronomy. 
There is a science of chemistry, which has its applications in 
many arts ; but no art of chemistry. And so the science of 
political economy finds its aj^plications in politics and its 
various subdi\dsions. But these applications can hardly 
be spoken of as constituting an art of political economy. 

Yet if we choose, as some have done, to speak of political 
economy as both science and art, then the art of political 
economy is the art of secm-ing the greatest production and 
the fairest distribution of wealth; the art whose proper 
object it is to abolish poverty and the fear of poverty, and 
so lift the poorest and weakest of mankind above the hard 
struggle to live. For if there be an art of political econ- 
omy, it must be the noble art that has for its object the 
benefit of all members of the economic community. 



104 THE MEANING OF POLITICAL ECONOMY. Book I. 

But just as when men believed in magic they held that 
there was both a white magic and a black magic— an art 
which aimed at alleviating suffering and doing good, and 
an art which sought knowledge for selfish and &\n\ ends — 
so, in this view, it may be said that there is a white polit- 
ical economy and a black political economy. Where a 
knowledge of the laws of the production and distribution 
of wealth is used to enrich a few at the expense of the 
many, or even where a reputed knowledge of those laws 
is used to bolster up such injustice, and by darkening 
counsel to prevent or delay the reform of it, such art of 
political economy, real or reputed, is truly a black art. 
This is the art of which the great Turgot spoke. 



For our part, having seen the nature and scope of the 
science of political economy, for which we adopt the older 
definition— the science that investigates the nature of 
wealth and the laws of its production and distribution — let 
us proceed in this order, endeavoring to discover: (1) the 
nature of wealth ; (2) the laws of its production ; and then 
(3) the laws of its distribution. When this is done we 
shall have accomplished all that is necessary for a true 
science of political economy, as I understand it. It will 
not be necessary for us to consider the matter of the con- 
sumption of wealth ; nor, indeed, as I shall hereafter show, 
is a true political economy concerned with consumption, 
as many of the minor economic writers have assumed it 
to be. 



BOOK 11. 



THE NATURE OF WEALTH 



Definitions are the basis of systematic reasoning. 
—Aristotle. 

The mixture of those things by speech which 
are by nature divided is the mother of all error. — 
Hool^er. 

Bacon made us sensible of the emptiness of the 
Aristotelian philosophy; Smith, in like manner, 
caused us to perceive the fallaciousness of all the 
previous systems of political economy ; but the lat- 
ter no more raised the superstructure of this science, 
than the former created logic. . . . "We are, how- 
ever, not yet in possession of an established text- 
book on the science of political economy, in which 
the fruits of an enlarged and accurate observation 
are referred to general principles that can be ad- 
mitted by every reflecting mind ; a work in which 
these results are so complete and well arranged as 
to afford to each other mutual support, and that may 
everywhere and at all times be studied with advan- 
tage.— J". B. Say, 180S. 

We may cite as examples of such inchoate but yet 
incomplete discoveries the great "Wealth of Na- 
tions " by Adam Smith— a work which still stands 
out, and will ever stand out, as that of a pioneer, 
and the only book on political economy which dis- 
plays its genius to every kind of intelligent reader. 
But among the specialists and the schools, this work 
of genius which swayed all Europe in its day, is laid 
upon the shelf as an antiquated affair, superseded 
by the smaller and duller men who have pulled his 
system to pieces and are offering us the fragments 
as a science most of whose first principles are still 
imder dispute.— Pro/e5s or (Greek) J. P. Maliaffy, 
" Tlie Present Position of Egyptology," "Nineteenth 
Century," August, 1894. 



CONTENTS OF BOOK II. 



THE ]S^ATtJRE OF WEALTH. 



PAGE 

INTRODUCTION TO BOOK H 115 

CHAPTER I. 
CONFUSIONS AS TO THE MEANING OF WEALTH. 

SHOWING THE FAILURE OP THE CUKRENT POLITICAL ECONOMY TO 
DEFINE WEALTH, AND THE CONFUSIONS THEREFROM, CULMI- 
NATING IN THE ABANDONMENT OF POLITICAL ECONOMY BY ITS 
PROFESSED TEACHERS. 

Wealth the primary term of political economy — Common use 
of the word — Vagueness more obvious in political economy — 
Adam Smith not explicit — Increasing confusion of subsequent 
writers — Their definitions — Many make no attempt at defini- 
tion — Perry's proposition to abandon the term — Marshall and 
Nicholson — Faihu-e to define the t rm leads to the abandon- 
ment of political economy — This ( oneealed under the word 
"economic" — The intent expresse 1 by Macleod — Results to 
political economy 117 

CHAPTER II. 
CAUSES OF CONFUSION AS TO THE MEANING OF WEALTH. 

SHOWING THE REAL DIFFICULTY THAT BESETS THE 
ECONOMIC DEFINITION OF WEALTH. 

Effect of slavery on the definition of wealth — Similar influences 
now existing — John S. Mill on prevalent delusions — Genesis 

107 



108 CONTENTS OF BOOK II. 

PAGE 

of the protective absurdity — Power of special interests to 
iQold common opinion — Of injustice and absurdity, and the 
power of special interests to pervert reason — Mill an example 
of how accepted opinions may blind men — Effect upon a 
philosophical system of the acceptance of an incongruity — 
Meaning of a saying of Christ — Influence of a class profiting 
by robbery shown in the development of political economy — 
Archbishop Whately puts the cart before the horse — The power 
of a great pecuniary interest to affect thought can be ended only 
by abolishing that interest — This shown in American slavery . 131 



CHAPTER III. 
WHAT ADAM SMITH MEANT BY WEALTH. 

SHOWING HOW ESSENTIALLY ADAM SMITH'S PRIMARY CONCEPTION 
OF WEALTH DIFFERED FROM THAT NOW HELD BY HIS SUCCES- 
SORS. 

Significance of the title " Wealth of Nations" — Its origin shown 
in Smith's reference to the Physiocrats — His conception of 
wealth in his introduction — Objection by Malthus and by Mac- 
leod — Smith's primary conception that given in " Progress and 
Poverty " — His subsequent confusions . . . . . 143 



CHAPTER IV. 
THE FRENCH PHYSIOCRATS. 

SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE 
OF POLITICAL ECONOMY WERE, AND WHAT THEY HELD. 

Juesnay and his followers — The great truths they grasped and 
the cause of the confusion into which they fell — This used to 
discredit their whole system, but not really vital — They were 
real free traders — The scant justice yet done them — Reference 
to them in "Progress and Poverty "— Macleod's statement of 
their doctrine of natural order — Their conception of wealth — 
Their day of hope and their fall 148 



CHAPTER V. 
ADAM SMITH AND THE PHYSIOCRATS. 

SHOWING THE RELATION BETWEEN ADAM SMITH AND THE 
PHYSIOCRATS. 

Smith and Quesnay — The " Wealth of Nations " and Physioeratic 
ideas — Smith's criticism of the Physiocrats — His failure to ap- 
preciate the single tax — His prudence 160 



CONTENTS OF BOOK II. 109 

CHAPTER VI. 
SMITH'S INFLUENCE ON POLITICAL ECONOMY. 

SHOWING WHAT THE "WEALTH OF NATIONS" ACCOMPLISHED 
AND THE COURSE OF THE SUBSEQUENT DEVELOPMENT OF PO- 
LITICAL ECONOMY. 

PAGE 

Smith, a philosopher, who addi-essed the cultured, and whose at- 
tack on mercantilism rather found favor with the powerful land- 
owners — Not entirely exempt from suspicion of radicalism, yet 
pardoned for his affiliation with the Physiocrats — Efforts of 
Malthus and Eieardo on respectabilizing the science — The fight 
against the corn-laws revealed the true beneficiaries of protec- 
tion, biit passed for a free-trade victory, and much strength- 
ened the incoherent science — Confidence of its scholastic ad- 
vocates — Say's belief in the result of the colleges taking up 
political economy — Torrens's confidence — Failure of other 
countries to follow England's example — Cairnes doubts the 
effect of making it a scholastic study — His sagacity proved 
by the subsequent breakdown of Smith's economy — The true 
reason I'^O 

CHAPTER VII. 

INEFFECTUAL CROPINGS TOWARD A DETERMINATION 
OF WEALTH. 

SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY 
BEFORE "progress AND POVERTY." 

Illogical character of the "Wealth of Nations" — Statements of 
natural right — Spenee, Ogilvie, Chalmers, Wakefield, Spencer, 
Dove, Bisset — Vague recognitions of natural right — Protec- 
tion gave rise to no political economy in England, but did else- 
where — Germany and protectionist political economy in the 
United States— Divergence of the schools — Trade-unionism 
in socialism 182 

CHAPTER VIII. 
BREAKDOWN OF SCHOLASTIC POLITICAL ECONOMY. 

SHOWING THE REASON, THE RECEPTION, AND EFFECT ON PO- 
LITICAL ECONOMY OF "PROGRESS AND POVERTY." 

"Progress and Poverty" — Preference of professors to abandon 
the " science " rather than radically change it, brings the break- 
down of scholastic economy — The " Eneyelopsedia Britannica " 
— The "Austrian school" that has succeeded the "classical" 200 



110 CONTENTS OF BOOK 11. 

CHAPTER IX. 
WEALTH AND VALUE. 

SHOWING THE REASON FOR CONSIDERING THE NATURE OF 
VALUE BEFORE THAT OF WEALTH. 

PAGE 

The point of agreement as to wealth — Advantages of proceeding 
from this point 210 

CHAPTER X. 
VALUE IN USE AND VALUE IN EXCHANGE. 

SHOWING THE TWO SENSES OF VALUE; HOW THE DISTINCTION 
HAS BEEN IGNORED, AND ITS REAL VALIDITY ; AND THE REASON 
FOR CONFINING THE ECONOMIC TERM TO ONE SENSE. 

Importance of the term value — Original meaning of the word — 
Its two senses— Names for them adopted by Smith—Utility 
and desirability— Mill's criticism of Smith — Complete ignor- 
ing of the distinction by the Austrian school — Cause of this 
confusion — Capability of use not usefulness — Smith's distinc- 
tion a real one — The dual use of one word in common speech 
must be avoided in political economy — Intrinsic value . . 212 

CHAPTER XI. 

ECONOMIC VALUE— ITS REAL MEANING AND FINAL 

MEASURE. 

SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A RELATION 
OF PROPORTION ; AND THE AMBIGUITY WHICH HAS LED TO THIS. 

The conception of value as a relation of proportion — It is really 
a relation to exertion — Adam Smith's perception of this — His 
reasons for accepting the term value in exchange — His con- 
fusion and that of his successors 226 

CHAPTER XII. 
VALUE IN EXCHANGE REALLY RELATED TO LABOR. 

SHOWING THAT VALUE DOES NOT COME FROM EXCHANGEABILITY, 
BUT EXCHANGEABILITY PROM VALUE, WHICH IS AN EXPRESSION 
OF THE SAVING OF LABOR INVOLVED IN POSSESSION. 

Root of the assumption that the sum of values cannot increase 
or diminish — The fundamental idea of proportion — We can- 
not really think of value in this way — The confusion that 
makes us imagine that we do — The tacit assumption and re- 
luctance to examine that bolster the current notion — Imagina- 
tive experiment shows that value is related to labor — Common 



CONTENTS OF BOOK II. Ill 

PAGE 

facts that prove tliis — Current assumption a fallacy of undis- 
tributed middle — Various senses of "labor " — Exertion positive 
and exertion negative — Re-statement of the proposition as to 
value — Of desire and its measurement — Causal relationship of 
value and exchangeability — Imaginative experiment showing 
that value may exist where exchange is impossible — Value and 
expression of exertion avoided 235 

CHAPTER XIII. 
THE DENOMINATOR OF VALUE. 

SHOWING WHAT VALUE IS, AND ITS RELATIONS. 

What value is — The test of real value — Value related only to 
human desire — This perception at the bottom of the Austrian 
school — But its measure must be objective — How cost of 
production acts as a measure of value — Desire for similar 
things and for essential things — Application of this principle — 
Its relation to land values 250 



CHAPTER XIV. 
THE TWO SOURCES OF VALUE. 

SHOWING THAT THEKE IS A VALUE FROM PRODUCTION AND 
ALSO A VALUE FROM OBLIGATION. 

Value does not involve increase of wealth — Value of obligation 
— Of enslavement — Economic definition of wealth impossible 
without recogTiition of this difference in value — Smith's con- 
fusion and results — Necessity of the distinction — Value from 
production and value from obligation — Either gives the essen- 
tial quality of commanding exertion — The obligation of debt — 
Other obligations — Land values most important of all forms 
of value from obligation — Property in land equivalent to 
property in men — Common meaning of value in exchange — 
Real relation with exertion — Ultimate exchangeability is for 
labor — Ad?^m Smith right — Light thrown by this theory of 
value . . ' . . . .257 

CHAPTER XV. 
THE MEANING OF WEALTH IN POLITICAL ECONOMY. 

SHOWING HOW VALUE FROM PRODUCTION IS WEALTH IN 
POLITICAL ECONOMY. 

Wealth as fixed in ''Progress and Poverty" — Course of the 
scholastic political economy — The reverse method of this work 
— The conclusion the same — Reason of the disposition to in- 
clude all value as wealth — Metaphorical meanings — Biill and 
pun — Metaphorical meaning of wealth — Its core meaning — Its 



112 CONTENTS OF BOOK 11. 

PAGE 

use to express exchangeability— Similar use of money — Ordi- 
nary core meaning the proper meaning of wealth — Its use in 
individual economy and in political economy — What is meant 
by increase of wealth — Wealth and labor — Its factors nature 
and man — Wealth their resultant — Of Adam Smith — Danger 
of carrying into political economy a meaning proper in indi- 
vidual economy — Example of " money " — " Actual wealth " and 
"relative wealth" — "Value from production" and "value 
from obligation" — The English tongue has no single word for 
an article of wealth— Of " commodities "—Of "goods" — Why 
there is no singular in English — The attempt to form one by 
dropping the " s " and Anglo-German jargon .... 270 

CHAPTER XVI. 
THE GENESIS OF WEALTH. 

SHOWING HOW WEALTH ORIGINATES AND WHAT IT ESSEN- 
TIALLY IS. 

Reason of this inquiry — Wealth proceeds from exertion prompted 
by desire, but all exertion does not result in wealth — Simple 
examples of action, and of action resulting in wealth — "Rid- 
ing and tying" — Sub-divisions of effort resulting in increments 
of wealth — Wealth essentially a stored and transferable ser- 
vice — Of transferable service — The action of reason as natural, 
though not as certain and quick as that of instinct — Wealth 
is service impressed on matter — Must be objective and have 
tangible form 285 

CHAPTER XVII. 
THE WEALTH THAT IS CALLED CAPITAL. 

SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS. 

Capital is a part of wealth used indirectly to satisfy desire — 
Simple illustration of fruit — Wealth permits storage of labor — 
The bull and the man — Exertion and its higher powers — Per- 
sonal qualities cannot really be wealth or capital — The taboo 
and its modern form — Common opinion of wealth and capital 293 

CHAPTER XVIII. 
WHY POLITICAL ECONOMY CONSIDERS ONLY WEALTH. 

SHOWING THAT POLITICAL ECONOMY, AS PROPERLY STATED, 
COVERS ALL THE RELATIONS OF MEN IN SOCIETY INTO WHICH 
IT IS NECESSARY TO INQUIRE. 

Political economy does not include all the exertions for the 
satisfaction of material desires ; but it does include the gi'eater 
part of them, and it is through value that the exchange of 
services for services is made — Its duty and province . . 301 



CONTENTS OF BOOK II. 113 

i 

CHAPTER XIX. 

MORAL CONFUSIONS AS TO WEALTH. 

SHOWING HOW KICH AND POOR ARE CORRELATIVES, AND 
WHY CHRIST SYMPATHIZED WITH THE POOR. 

PAGE 

The legitimacy of wealth and the disposition to regard it as 
sordid and mean — The really rich and the really poor — They 
are really correlatives — The good sense of Christ's teaching . 304 

CHAPTER XX. 
OF THE PERMANENCE OF WEALTH. 

SHOWING THAT VALUES FROM OBLIGATION SEEM REALLY TO 
LAST LONGER THAN VALUES PROM PRODUCTION. 

Value from production and value from obligation — The one 
material and the other existing in the spiritual — Superior 
permanence of the spiritual — Shakespeare's boast — Mgecenas's 
buildings and Horace's odes — The two values now existing — 
Franchises and land values last longer than gold and gems — 
Destruction in social advance — Conclusions from all this . 308 

CHAPTER XXI. 
THE RELATION OF MONEY TO WEALTH. 

SHOWING THAT SOME MONEY IS AND SOME MONEY IS NOT 
WEALTH. 

Where I shall treat of money — No categorical answer can yet 
be given to the question whether money is wealth — Some 
money is and some is not wealth 313 



INTRODUCTION TO BOOK II. 

SINCE political economy is the science which treats of 
the nature of wealth and the laws of its production 
and distribution, our fii'st step is to fix the meaning that 
in this science properly attaches to its primary term. 

I shall in the first place show the need for an exhaustive 
inquiry, by showing the confusion that from the time of 
Adam Smith has attached to this term, and the utter 
incoherency with regard to it into which the scholastic 
economy has now fallen. 

I shall next try to ascertain the causes of this confusion. 
This will lead to a consideration of economic development, 
and in the absence in our literature of any intelligent his- 
tory of political economy, I shall attempt briefly to trace 
its course, from the time of Adam Smith and his prede- 
cessors, the French economists called Physiocrats, to its 
virtual abandonment in the teachings of the English and 
American colleges and universities at the present time. 

Having seen that the only point as to wealth on which 
the scholastic economists now agree is that it has value, 
and that their confusions as to wealth proceed largely from 
confusions as to value, I shall then try to determine the 
proper meaning of the term value. That fixed, we shall 
be in a position to fi:s the real meaning and relations of the 
term wealth, and shall proceed to do so. 

Although in this book it will be seen that I am giving 
many chapters to a subject which preceding systematic 

115 



116 THE NATURE OF WEALTH. Booh 11. 

writers have passed over in a few lines, even where, as is 
the case with many of them, they have not utterly ignored 
it, I am sure that the reader will ultimately find in the ease 
and certainty with which subsequent inquiries may be 
conducted an ample reward for the care thus taken in the 
beginning. 



CHAPTER I. 
CONFUSIONS AS TO THE MEANING OF WEALTH. 

SHOWING THE FAILURE OP THE CURRENT POLITICAL ECON- 
OMY TO DEFINE WEALTH, AND THE CONFUSIONS THERE- 
PROM, CULMINATING IN THE ABANDONMENT OP POLITICAL 
ECONOI.IY BY ITS PROFESSED TEACHERS. 

Wealth the primary term of political economy— Common use of 
the word— Vagueness more obvious in political economy— Adam 
Smith not explicit— Increasing confusion of siibsequent writers— 
Their definitions— Many make no attempt at definition— Perry's 
proposition to abandon the term— Marshall and Nicholson- Fail- 
lu'e to defijae the term leads to the abandonment of political econ- 
omy—This concealed under the word "economic" — The intent 
expressed by Macleod— Eesults to political economy. 

THE purpose of the science of political economy is, as 
we have seen, the investigation of the laws that gov- 
ern the production and distribution of wealth in social or 
civilized life. In beginning its study, our first step is 
therefore to see what is the nature of the wealth of socie- 
ties or communities ; to determine exactly what we mean 
by the word wealth when used as a term of political 
economy. 

There are few words in more common use than this 
word wealth, and in the general way that suffices for 
ordinary purposes we all know what we mean by it. But 
when it comes to defining that meaning with the precision 

117 



118 THE NATUEE OF WEALTH. Book 11. 

necessary for tlie purposes of political economy, so as to 
determine what is and what is not properly included in the 
idea of wealth as political economy must treat of it, most 
of us, though we often and easily use the word in ordinary 
thought and speech, are apt to become conscious of indefi- 
niteness and perplexity. 

This is not strange. Indeed, it is a natural result of the 
transference to a wider economy of a term we are accus- 
tomed to use in a narrower economy. In our ordinary 
thought and speech, referring, as it most frequently does, 
to every-day affairs and the relations of individuals with 
other individuals, the economy with which we are usually 
concerned and have most frequently in mind is individual 
economy, not political economy— the economy whose 
standpoint is that of the unit, not the economy whose 
standpoint is that of the social whole or social organism ; 
the Greater Leviathan of natural origin of which I have 
before spoken. 

The original meaning of the word wealth is that of 
plenty or abundance ; that of the possession of things con- 
ducive to a certain kind of weal or well-being. Health, 
strength and wealth express three kinds of weal or well- 
being. Health relates to the constitution or structure, and 
expresses the idea of well-being with regard to the physi- 
cal or mental frame. Strength relates to the vigor of the 
natural powers, and expresses the idea of well-being with 
regard to the ability of exertion. Wealth relates to the 
command of external things that gratify desire, and ex- 
presses the idea of well-being with regard to possessions 
or property. Now, as social health must mean something 
different from individual health, and social strength some- 
thing different from individual strength ; so social wealth, 
or the wealth of the society, the larger man or Grreater 
Leviathan of which individuals living in civilization are 



Cluq}.!. CONFUSIONS AS TO MEANING. 119 

components, must be something different from the wealth 
of the individual. 

In the one economy, that of individuals or social units, 
everything is regarded as wealth the possession of which 
tends to give wealthiness, or the command of external 
things that satisfy desire, to its individual possessor, even 
though it may involve the taking of such things from 
other individuals. But in the other economy, that of 
social wholes, or the social organism, nothing can be re- 
garded as T>'ealth that does not add to the wealthiness of 
the whole. What, therefore, may be regarded as wealth 
from the individual standpoint, may not be wealth from 
the standpoint of the society. An individual, for instance, 
maj^ be wealthy by virtue of obligations due to him from 
other individuals ; but such obligations can constitute no 
part of the wealth of the society, which includes both 
debtor and creditor. Or, an individual may increase his 
wealth by robbery or by gaming ; but the wealth of the 
social whole, which comprises robbed as well as robber, 
loser as well as winner, cannot be thus increased. 

It is therefore no wonder that men accustomed to the 
use of the word wealth in its ordinary sense, a sense in 
which no one can avoid its continual use, should be liable, 
unless they take great care, to slip into confusion when 
they come to use the same word in its economic sense. 
But what does seem strange is that indefiniteness, per- 
plexity and confusion as to the meaning of the economic 
term wealth, are even more obvious in the writings of 
the professional economists who are accredited by colleges 
and universities and other institutions of learning with 
the possession of special knowledge which authorizes them 
to instruct their fellows on economic subjects. While as 
for the professional statisticians who in long arrays of 
figures attempt to estimate the aggregate wealth of states 



120 THE NATUEE OF WEALTH. BookIL 

and nations, they seem for the most part innocent of any 
suspicion that what may be wealth to an individual may 
not be wealth to a community.* 

Adam Smith, who is regarded as the founder of the 
modern science of political economy, is not \evj definite 
or entirely consistent as to the real nature of the wealth 
of nations, or wealth in the economic sense. But since 
his time the confusions of which he shows traces, instead 
of being cleared up by the writings of those who in our 
schools and colleges are recognized as political eeonomists,t 
has become progressively so much worse confounded that 
in the latest and most elaborate of these treatises all at- 
tempts to define the term seem to have been abandoned. 

In '' Progress and Poverty" (1879), I showed the utter 
confusion as to wealth into which the scholastic political 
economy had fallen, by printing together a number of 
varying and contradictory definitions of its sub-term cap- 
ital, as given by accredited economic writers.^ Although, 
I was then obliged to fix the meaning of the main term 
wealth in order to fix the meaning of the sub-term 

* A curious, if not comical, instance of tlie loose way in which pro- 
fessed statisticians jump at conclusions is afforded in the controversy 
I had in "Frank Leslie's Weekly" (1883) with Professor Francis A. 
Walker, then superintendent of the United States Census, and which 
was afterwards reprinted as an appendix to the American edition of 
my "Social Problems." 

t " Progi-ess and Poverty," although it has already exerted a wider 
influence than any other economic work written since the "Wealth 
of Nations," is not so recognized, not being even alluded to in the 
elaborate history of political economy which, on account of the utter 
chaos into which the teachings of that science have fallen, takes in 
the last edition of the " Encyclopedia Britanniea " the place before 
accorded to the science itself, and which has since been reprinted in 
separate form. ("A History of Political Economy," by John Kells 
Ligram, LL.D., Macmillan & Co., 1888.) 

\ " Progress and Poverty," Book I., Chapter II., " The Meaning of 
the Terms." 



Chap. I. CONFUSIONS AS TO MEANING. 121 

capital, with whicli I was immediately concerned, the 
confusion among the accredited economists has " got no 
better very fast," the '^ economic revolution " which has in 
the meanwhile displaced from their chairs the professors 
of the then orthodox political economy in order to give 
place to so-called '' Austrians," or similar professors of 
"economics," having only made confusion worse con- 
founded. Let me, therefore, in order to show in the most 
up-to-date way the confusion existing among scholastic 
economists as to the primary term of political economy, 
put together what definitions of the economic term 
wealth I can find in the works of representative and 
accredited economic writers since Adam Smith to the 
present time, placing them in chronological order as far 
as possible : 

J. B. Say— Divides wealth into natural and social, and 
applies the latter term to whatever is susceptible of ex- 
change, 

Malthus— Those material objects wliich are necessary, 
useful or agreeable to man. 

Torrens— Articles which possess utility and are produced 
by some portion of voluntary effort. 

McCulloch— Those articles or products which have ex- 
changeable value, and are either necessary, useful or 
agreeable to man. 

Jones — Material objects voluntarily appropriated by 
man. 

Rae— All I can find on tliis subject in his '^ New Princi- 
ples of Political Economy" (1833) is that "individuals 
grow rich by the acquisition of wealth previously existing ; 
nations by the creation of wealth that did not before 
exist." 

Senior— All those things, and those things onl}'-, which 
are transferable, are limited in supply, and are directly or 
indirectly productive of pleasure or preventive of pain. . . . 



122 THE NATUEE OF WEALTH. Book II. 

Healtli, strength and knowledge, and tlie other acquired 
powers of body and mind, appear to us to be articles of 
wealth.. 

Yethake— All objects, immaterial as well as material, 
having utility, excepting those not susceptible of being 
appropriated, and those supplied gratuitously by nature. 
By the wealth of a community or nation is meant aU the 
wealth which is possessed by the persons composing it, 
either in their individual or corporate capacities. 

John Stuart Mill— All useful and agreeable things which 
possess exchangeable value ; or in other words, all useful 
and agreeable things except those which can be obtained, 
in the quantity desired, without labor or sacrifice. 

Fawcett— Wealth may be defined to consist of every 
commodity which has an exchangeable value. 

Bowen— The aggregate of aU things, whether material 
or immaterial, which contribute to comfort and enjoyment 
and which are objects of frequent barter and sale. 

Jevons— What is (1) transferable, (2) limited in supply, 
(3) useful. 

Mason and Lalor, 1875— Anything for which something 
can be got in exchange. 

Leverson— The necessaries and comforts of life produced 
by labor. 

Shadwell— All articles the possession of which affords 
pleasure to anybody. 

Macleod— Anything whatever that can be bought, sold 
or exchanged, or whose value can be measured in money. 
. . . Wealth is nothing but exchangeable rights. 

De Laveleye— Everything which answers to men's ra- 
tional wants. A useful service and a useful object are 
equally wealth. . . . Wealth is what is good and useful— 
a good climate, well-kept roads, seas teeming with fish, are 
unquestionably wealth to a country, and yet they cannot 
be bought. 



Chap. I. CONFUSIONS AS TO MEANING. 123 

Francis A. Walker— AH articles of value and nothing 
else. 

Macvane— All tlie useful and agreeable material objects 
we own or have the right to use and enjoy without asking 
the consent of any other person. Wealth is of two gen- 
eral kinds— natural wealth and wealth produced by labor. 

Clark— Usage has employed the word wealth to sig- 
nify, first, the comparative welfare resulting from material 
possessions, and secondly, and by a transfer, the posses- 
sions themselves. Wealth then consists in the relative- 
weal-constituting elements in man's material environment. 
It is objective to the user, material, useful and appropri- 
able. 

Laughlin— Defines material wealth as something which 
satisfies a want ; cannot be obtained without some sacrifice 
of exertion, and is transferable ; but also speaks of imma- 
terial wealth without defining it. 

Newcomb— That for the enjoyment of which people pay 
money. The skill, business ability or knowledge which 
enables their possessors to contribute to the enjoyment of 
others, including the talents of the actor, the ability of the 
man of business, the knowledge of the lawyer and the skill 
of the physician, is to be considered wealth when we use 
the term in its most extended sense. 

Bain— A commodity is material worked up after a de- 
sign to answer to a definite demand or need, and wealth is 
simply the sum total of commodities. 

Ruskin— This brilliant essayist and art critic can hardly 
be classed as a scholastically accepted political economist, 
and I have refi*ained from giving his definition of wealth 
in what otherwise would have been its proper place. But 
his "Unto this Last" (1866) consists of four essays on 
political economy, and the brillia,nt fiashes of ethical truth 
which they like his other works contain have led many 
admirers to regard him as a profound economist. He is 



124 THE NATURE OF WEALTH. BooTcII. 

anytliing but complimentary to the ''modern soi-disant 
science/' as he calls it, against which he brings the charge 
that while claiming to be the science of wealth it cannot 
tell what wealth is. In the preface to these essays he says : 
" The real gist of these papers, their central meaning and 
aim is to give, as I believe, for the first time in plain 
EngHsh, a logical definition of wealth; such definition 
being absolutely needed for a basis of economical science." 
It would be well, therefore, without assuming that Ruskin 
in any way represents the scholastic political economy, 
which he likened to an astronomy unable to say what a 
star was, to give his definition. That definition, to use 
his own words is— "The possession of useful articles that 
we can use," or as again stated somewhat later on, " The 
possession of the valuable by the valiant." 

The endeavor to get together these definitions of wealth 
by economic writers has involved considerable effort, but 
it is likely to be noticeable by its omissions. The fact is, 
that many of the best-known writers on political economy, 
such for instance as Ricardo, Chalmers, Thorold Rogers 
and Cairnes, make no attempt to give any definition of 
wealth. The same thing is to be said of the two volumes 
of Karl Marx entitled " Capital;" and also of the two vol- 
umes on the same subject by Bohm-Bawerk, which also 
have been translated into English, and are much quoted 
by that now dominant school of scholastic political econ- 
omy known as the "Austrian." And while many of the 
writers who make no attempt to define wealth, do have a 
good deal to say about it, what thej say is too diffused 
and incoherent either to quote or condense. There are 
many who without saying so, evidently hold the opinion 
thus frankly expressed by Professor Perry in his " Ele- 
ments of Political Economy" (1866) : 

This word wealth has been the bane of political economy. It is 
the bog whence most of the mists have arisen which have beclouded 



Chap. I. CONFUSIONS AS TO MEANING. 125 

the whole subject. From its indefiniteness and the variety of asso- 
ciations it carries along with it in different minds, it is totally unfit 
for any scientific purpose whatever. It is itself almost impossible 
to be defined, and consequently can serve no useful purpose in a 
definition of anything else. . . . The meaning of the word wealth 
has never yet been settled ; and if political economy must wait until 
that work be done as a preliminary, the science will never be satis- 
factorily constructed. . . . Men may think, and talk, and write, and 
dispute till doomsday, but until they come to use words with defi- 
niteness, and mean the same thing by the same word, they reach com- 
paratively few results and make but little progress. And it is just 
at this point that we find the first grand reason of the slow advance 
hitherto made by this science. It undertook to use a word for scien- 
tific purposes which no amount of manipulation and explanation could 
make suitable for that service. Happily there is no need to use this 
word. In emancipating itself from the word wealth as a technical 
term, political economy has dropped a clog, and its movements are 
now relatively free. 

To make this exhibition of definitions as fairly repre- 
sentative as possible I have wished to include in it that of 
Professor Alfred Marshall, Professor of Political Economy 
in the University of Cambridge, England, wliose " Princi- 
ples of Economics" (of which only the first volume, issued 
in 1890, and containing some 800 octavo pages, has yet 
been published) may be considered the latest and largest, 
and scholastically the most highly indorsed, economic work 
yet published in English. 

It cannot be said of him, as of many economic writers, 
that he does not attempt to say what is meant by wealth, 
for if one turns to the index he is directed to a whole 
chapter. But neither in this chapter nor elsewhere can I 
find any paragraph, however long, that may be quoted as 
defining the meaning he attaches to the term wealth. The 
only approach to it is this : 

All wealth consists of things that satisfy wants, directly or indi- 
rectly. All wealth therefore consists of goods ; but not all kinds of 
goods are reckoned as wealth. 



126 THE NATURE OF WEALTH. Bool 11. 

But for the distinction between goods reckoned as 
wealth and goods not reckoned as wealth, which one would 
think was about to follow, the reader looks in vain. He 
merely finds that Professor Marshall gives him the choice 
of classifying goods into external-material-transferable 
goods, external-material-non-transferable goods, external- 
personal-transferable goods, external-personal-non-trans- 
ferable goods, and internal-personal-non-transferable 
goods ; or else into material-external-transferable goods, 
material-external-non-transferable goods, personal-exter- 
nal-transferable goods, personal-external-non-transferable 
goods, and personal-internal-non-transferable goods. But 
as to which of these kinds of goods are reckoned as wealth 
and which are not. Professor Marshall gives the reader no 
inkling, unless, indeed, he may be able to find it in Wag- 
ner's " Volkswirthschaf tslehre," to which the reader is re- 
ferred at the conclusion of the chapter as throwing " much 
light upon the connection between the economic concept 
of wealth and the juridical concept of rights in private 
property." I can convey the impression produced on my 
mind by repeated struggles to discover what the Professor 
of Political Economy in the great English University of 
Cambridge holds is to be reckoned as wealth, only by say- 
ing that it seems to comprise all things in the heavens 
above, the earth beneath and the waters under the earth, 
that may be useful to or desired by man, individually or 
collectively, including man himself with all his natural or 
acquired capabilities, and that all I can absolutely aflrm, 
for it is the only thing for which I can find a direct state- 
ment, is, that " we ought for many pm-poses to reckon the 
Thames a part of England's wealth." 

The same utter, though perhaps somewhat less elaborate, 
incoherency is shown by Professor J. Shield Nicholson, 
Professor of Political Economy in the great Scottish 
University of Edinburgh, whose " Principles of Political 



Chaj}. L CONFUSIONS AS TO MEANINa. 127 

Economy " appeared in first volume (less than half as big 
as that of Professor Marshall's) in 1893, and has not yet 
(1897) been succeeded by another. Looking up the index 
for the word " wealth " one finds no less than fifteen refer- 
ences, of which the first is "popular conception of," and 
the second "economic conception of." Yet in none of 
these, nor in the whole volume, though one wade through 
it all in the search, is anything like a definition of wealth to 
be found, the only thing resembling a direct statement 
being the incidental remark (p. 404) that "land is in 
general the most important item in the inventory of na- 
tional wealth " — a proposition which logically is as untrue 
as that we ought to reckon the Thames a part of England's 
wealth. 

Now, wealth is the object-noun, or name given to the 
subject-matter, of political economy, the science that seeks 
to discover the laws of the production and distribution of 
wealth in human society. It is therefore the economic 
term of first importance. Unless we know what wealth 
is, how possibly can we hope to discover how it is pro- 
cm-ed and distributed ? Yet after a century of what passes 
for the cultivation of this science, with professors of 
political economy in every college, the question, " What is 
wealth ? " finds at their hands no certain answer. Even to 
such questions as, " Is wealth material or immaterial?" or 
" Is it something external to man or does it include man 
and his attributes ? " we get no undisputed reply. There 
is not even a consensus of opinion. And in the latest and 
most pretentious scholastic teaching the attempt to obtain 
any has been virtuall}", where not definitely, abandoned, 
and the economic meaning of wealth reduced to that of 
anything having value to the social unit. 

It is clear that failure to define its subject-matter or 
object-noun must be fatal to any attempted science ; for it 
shows lack of the first essential of true science. And the 



128 THE NATUEE OF WEALTH. Boole 11. 

fate of rejection even by those who profess to study and 
teach it has ah*eady befallen political economy at the hands 
of the accredited institutions of learning. 

This fact will not be obvious to the ordinary reader, for 
it is concealed to him under a change in the meaning of 
a word. 

Since the term comes into our language from the Greek, 
the proper word for expressing the idea of relationship to 
political economy is "politico-economic." But this is a 
term too long, and too alien to the Saxon genius of our 
mother tongue, for frequent repetition. And so the word 
" economic " has come into accepted use in English, as ex- 
pressing that idea. We are justified therefore, in suppos- 
ing, and as a matter of fact do generally supj^ose when we 
first hear of them, that the works now written by the pro- 
fessors of pohtical economy in our universities and col- 
leges, and entitled " Elements of Economics," " Principles 
of Economics," " Manual of Economics," etc., are treatises 
on political economy. Examination, however, will show 
that many of these at least are not in reality treatises on 
the science of political economy, but treatises on what 
their authors might better call the science of exchanges, 
or the science of exchangeable quantities. This is not the 
same thing as political economy, but quite a different thing 
—a science in short akin to the science of mathematics.* 
In this there is no necessity for distinguishing between 
what is wealth to the unit and what is wealth to the whole, 
and moral questions, that must be met in a true political 
economy, may be easily avoided by those to whom they 
seem awkward. 

A proper name for this totally different science, which 
the professors of political economy in so many of the lead- 

* The attempts by titular professors of political economy to find 
mathematical expression for what they call "economics" must be 
familiar to those who have toiled through recent scholastic literatm-e. 



Chap. I. CONrUSIONS AS TO MEANING. 129 

ing colleges and universities on both sides of the Atlantic 
have now substituted in their teaching for the science they 
are officially supposed to expound, would be that of " eat- 
allactics/' as proposed by Archbishop Whately, or that of 
"plutology/'as proposed by Professor Hern, of Melboui-ne ; 
but it is certainly not properly " economics," for that by 
long usage is identified with political economy. 

Both the reason for, and what is meant by, the change 
of title from political economy to economics, which is so 
noticeable in the writings of the professors of political 
economy in recent years, are thus frankly shown by Mac- 
leod (Vol. I., Chapter VII., Sec. 11, " Science of Econom- 
ics ") : 

We do not propose to make any change at all in the name of the 
science. Both the terms "Political Economy" and "Economic Sci- 
ence," or "Economics," are in common nse, and it seems better to 
discontinue that name which is liable to misinterpretation, and which 
seems to relate to polities, and to adhere to that one which most 
clearly defines its nature and extent and is most analogous to the 
names of other sciences. We shall, therefore, henceforth discon- 
tinue the use of the term " political economy " and adhere to that of 
"economics." Economics, then, is simply the science of exchanges, 
or of commerce in its widest extent and in all its forms and varieties ; 
it is sometimes called the science of wealth or the theory of value. 
The definition of the science which we offer is : 

Economics is the science which treats of the laws which govern 
the relations of exchangeable quantities. 

Now the laws which govern the relations of exchange- 
able quantities are such laws as 2 + 2 = 4; 4 — 1 = 3; 
2x4 = 8; 4-T-2 = 2; and their extensions. 

The proper place for such laws in any honest classifica- 
tion of the sciences is as laws of arithmetic or laws of 
mathematics, not as laws of economics. And the attempt 
of holders of chairs of political economy to take advantage 
of the usage of language which has made " economic " a 
short word for " politico-economic " to pass off their " sci- 



130 THE NATURE OF WEALTH. BooJcIL 

ence of economics " as if it were tlie science of political 
economy, is as essentially dishonest as the device of the 
proverbial Irishman who attempted to cheat his partners 
by the formula, "Here's two for you two, and here's two 
for me too." 

To this, in less than a century after Say congratulated 
his readers on the first establishment of chairs of political 
economy in universities, has the scholastic political econ- 
omy come. 

Professor Perry, writing thirty years ago, thought that 
by emancipating itself from the word wealth as a tech- 
nical term, political economy would drop a clog and its 
movements would become relatively free. In what is now 
taught from the chairs of political economy in our leading 
colleges on both sides of the Atlantic the clog has indeed 
been dropped, with results which very strongly suggest 
the increased freedom of movement which comes from 
the dropping of its tail by a boy's kite. Without the clog 
of an object-noun, political economy as there taught has 
plunged out of existence, and the science of values which 
is taught in its place has no answer whatever to give even 
to questions which Professor Perry would have thought 
completely settled at the time he wrote. 



CHAPTER II. 

CAUSES OF CONFUSION AS TO THE MEANING 
OF WEALTH. 

SHOWING THE REAL DIFFICULTY THAT BESETS THE 
ECONOMIC DEFINITION OF WEALTH. 

Effect of slavery on the definition of wealth— Similar influences now 
existing— John Stuart Mill on prevalent delusions— Genesis of the 
protective absurdity— Power of special interests to mold common 
opinion— Of injustice and absui-dity, and the power of special in- 
terests to pervert reason— MiU an example of how accepted opin- 
ions may blind men — Effect upon a philosophical system of the 
acceptance of an incongruity— Meaning of a saying of Christ- 
Influence of a class profiting by robbery shown in the development 
of political economy— Archbishop Whately puts the cart before 
the horse— The power of a great pecuniary interest to affect 
thought can be ended only by abolishing that interest— This shown 
in American slavery. 

THE neglect of political economy in the classical world 
has been explained by modern economists as due to 
the effect of slavery in causing labor to be regarded as 
degi'ading.* 

But in this a quicker and more direct effect of slavery 
in preventing the cultivation of political economy has been 
overlooked. 

* See, for instance, McCuUoch's "Principles of Political Economy" 
(1825), Part I. 

131 



132 THE NATURE OF WEALTH. Book II. 

Except perhaps as the crucified fomenter of a servile 
rebellion, the only class in which any philosopher of the 
ancient world might have got a hearing that could have 
brought his name and teachings down to us, was that 
wealthy class, whose riches were largely in their slaves. 
For in any social condition in which privilege and wealth 
are inequitably distributed, what Jefferson said of Jesus * 
must be true of aU moral or economic teachers— " All the 
learned of His country, intrenched in its power and riches, 
were opposed to Him, lest His labors should undermine 
their advantages." 

The first question which a coherent political economy 
must answer is, what is wealth ? This, in a state of society 
in which the ruling class were universally slaveholders, 
was too delicate a question for any accredited philosopher 
to have fairly met. Even the most astute among them 
could go no further than to say, with the inteUeetual giant 
Aristotle, that wealth "is all things whose value is mea- 
sured by money," or with the Roman jurist Ulpian, " that 
is wealth which can be bought and sold." From this 
point, the very point to which our modern political econ- 
omy has in current scholastic teachings now come again, 
though there may be economies of finance and economies 
of exchange and economies of agriculture (there were 
many such among the Greeks and Romans, their agricul- 
tural economy even teaching how slaves should be sold as 
soon as age and infirmity began to lessen the work that 
could be extorted from them), there was and could be no 
political economy. 

But this indisposition to recognize the distinction be- 
tween what may be wealth to the individual and what is 



* " Syllabus of an estimate of the merits of the doctrines of Jesus." 
("The Writings of Thomas Jefferson," collected and edited by Paul 
Leicester Ford, Putnam's Sons, Vol. VIH., p. 227.) 



Chap. 11. CAUSES OF CONFUSION. 133 

wealth to the society, which has prevented the growth of 
any science of political economy wherever, either in the 
ancient or the modern world, the ownership of human 
beings has been an important element in the wealth of the 
wealthy class, has not entirely ceased to show itself with 
the abolition of chattel slavery. Even the men who have 
seen that there was a connection between the failure of the 
restless and powerful thinkers of the classic world to de- 
velop a political economy and their acceptance of slavery, 
have in their own development of pohtical economy been 
unconsciously affected by a similar retarding and aberrat- 
ing influence. Chattel slavery is only one of the means by 
which individuals become wealthy without increase in the 
general wealth, and as in modern civilization it has lost 
importance, other means to the same end have taken its 
place. But wherever and from whatever causes society is 
divided into the very rich and the very poor, the primary 
question of political economy, what is wealth ? must be a 
delicate one to men sensibly or insensibly influenced by 
the feelings and opinions of the dominating class. For 
in such social conditions much that commonly passes for 
wealth must really be only legalized robbery, and nothing 
can be more offensive to those enjoying the profit of rob- 
bery than to caU it by its true name. 

In the preliminary remarks to his '' Principles of Politi- 
cal Economy " John Stuart Mill says : 



It often happens that the universal "belief of one age of mankind 
—a belief from which no one was, nor without an extraordinary 
effort of genius and courage, could at that time be free— becomes to 
a subsequent age so palpable an absurdity, that the only difficulty 
then is to imagine how such a thing can ever have appeared credible. 
It has so happened with the doctrine that money is synonymous with 
wealth. The conceit seems too preposterous to be thoiight of as a 
serious opinion. It looks like one of the crude fancies of childhood, 
instantly corrected by a word from any grown person. But let no 



134 THE NATURE OF WEALTH. BooJcIL 

one feel confident that he should have escaped the delusion if he had 
lived at the time when it prevailed. 



Let no one be confident indeed ! 

Yet it is a mistake to liken the absurdities of the mer- 
cantile or protective system to the crude fancies of child- 
hood. This has never been their origin or their strength. 
In the petty commerce in marbles and tops that goes on 
among school-boys no boy ever imagined that the more 
he gave and the less he got in such exchange the better 
off he should be. No primitive people were ever yet so 
stupid as to suppose that they could increase their wealth 
by taxing themselves. Any child that could understand 
the proposition would see that a do^ar's worth of gold 
coidd not be more valuable than a dollar's worth of any- 
thing else, as readily as it would see that a pound of lead 
could not be heavier than a pound of feathers. Such 
ideas are not the fancies of childhood. Their growth, 
their strength, their persistence, as we may clearly see in 
the newer countries of America and Australia, where they 
have appeared and gathered force since Adam Smith's 
time, is due to the growth of special interests in artificial 
restrictions on trade as a means of increasing individual 
^wealth at the expense of the general wealth. 

The power of a special interest, though inimical to the 
general interest, so to influence common thought as to 
make fallacies pass as truths, is a great fact without which 
neither the political history of our own time and people 
nor that of other times and peoples can be understood. 
A comparatively smaU number of individuals brought 
into virtual though not necessarily formal agreement of 
thought and action by something that makes them indi- 
vidually wealthy without adding to the general wealth, 
may exert an influence out of all proportion to their num- 
bers. A special interest of this kind is, to the general in- 



Chap. 11. CAUSES OF CONFUSION. 135 

terests of society, as a standing army is to an unorganized 
mob. It gains intensity and energy in its specialization, 
and in the wealth it takes from the general stock finds 
power to mold opinion. Leism*e and culture and the cir- 
cumstances and conditions that command respect accom- 
pany wealth, and intellectual ability is attracted by it. On 
the other hand, those who suffer from the injustice that 
takes from the many to enrich the few, are in that very 
thing deprived of the leisure to think, and the opportuni- 
ties, education and graces necessary to give their thought 
acceptable expression. They are necessarily the "unlet- 
tered," the "ignorant," the "vulgar," prone in their con- 
sciousness of weakness to look up for leadership and 
guidance to those who have the advantages that the pos- 
session of wealth can give. 

Now, if we consider it, injustice and absurdity are sim- 
ply different aspects of incongruity. That which to right 
reason is unjust must be to right reason absurd. But an 
injustice that impoverishes the many to enrich the few 
shifts the centers of social power, and thus controls the 
socieJ organs and agencies of opinion and education. 
Growing in strength and acceptance by what it feeds on, 
it has only to continue to exist to become at length so 
vested or rooted, not in the constitution of the human 
mind itseK, but in that constitution of opinions, beliefs and 
habits of thought which we take, as we take our mother 
tongue, from our social environment, that it is not per- 
ceived as injustice or absurdity, but seems even to the 
philosopher an integral part of the natural order, with 
which it were as idle if not as impious to quarrel as with 
the constitution of the elements. Even that highest gift, 
tlie gift of reason, is in its bestowal on man subjected to 
his use, and the very mental qualities that enable us to 
discover truth may be perverted to fortify error, and are 
always so perverted wherever an anti-social special interest 



136 THE NATURE OF WEALTH. BooJcII. 

gains control of the thinking and teaching functions of 
society. 

In this lies the explanation of the fact that looking 
through the vista of what we know of human history we 
everywhere find what are to us the most palpable absurdi- 
ties enshrining themselves in the human mind as unques- 
tionable truths— whole nations the prey of preposterous 
superstitions, abasing themselves before fellow-creatures, 
often before idiots or voluptuaries, whom their* imagina- 
tion has converted into the representatives of Deity ; the 
great masses toiling, suffering, starving, that those they 
bear on their shoulders may live idly and daintily. Wher- 
ever and whenever what we may now see to be a palpable 
absurdity has passed for truth, we may see if we look close 
enough that it has always been because behind it crouched 
some powerful special interest, and that the man has 
hushed the questioning of the child. 

This is of human nature. The world is so new to us 
when we first come into it ; we are so compelled at every 
turn to rely upon what we are told rather than on what 
we ourselves can discover ; what we find to be the common 
and respected opinion of others has with us such almost 
irresistible weight, that it becomes possible for a special 
interest by usurping the teaching province to make to us 
black seem white and wrong seem right. 

Let no one indeed feel confident that he could have es- 
caped any delusion, no matter how preposterous, that has 
ever prevailed among men, if he had lived when and where 
it was accepted. From as far back as we can see, human 
nature has not changed, and we have but to look around 
us to discover in operation to-day the great agency that 
has made falsehood seem truth. 

Of the fact of which, in what I have quoted, John Stuart 
Mill speaks with reference to the doctrine that money is 
synonymous with wealth— the fact that accepted opinion 



Chap. 11. CAUSES OF CONFUSION. 137 

may blind even able and courageous men— lie himself, in 
the same book and almost in the same paragraph, gives 
unconscious illustration, in the timidity with which he 
touches the question of the nature of wealth, when it leads 
beyond what Adam Smith had already shown, that it was 
not synonymous with money. He recognizes, indeed, 
that what is wealth to an individual is not therefore wealth 
to the community or nation, and definitely states, or rather 
concedes, that debt, even funded debt, is no part of the 
wealth of the society. But the way in which he does this 
is suggestive. He says : 

The canceling of the debt would be no destruction of wealth, but 
a transfer of it ; a wi'ongful abstraction of wealth from certain mem- 
bers of the community, for the profit of the government or of the 
taxpayers. 

The gratuitous word " wrongful" shows the bias. And 
even this recognition that debt cannot be wealth in the 
economic sense is ignored in the subsequent definition of 
wealth. 

So strongly indeed was John Stuart Mill, who seems to 
me a very type of intellectual honesty, under the influence 
of the accustomed ideas of his time and class, that al- 
though he saw with perfect clearness that the wealth that 
comes to individuals by reason of their monopoly of land 
really comes to them through force and fraud, yet he 
seemingly never dreamed that land was no part of national 
wealth. Nor yet, does he seem even to dream that the 
people of a country, once they had been forcibly deprived 
of it, could recover what he saw to be their natural right. 
In all the history of dead absurdities there can be no sen- 
tence more strikingly illustrative of the power of accepted 
opinion to hide absurdity than this of his : 

The land of Ireland, the land of every country, belongs to the 
people of that country. The individuals called landowners have no 



138 THE NATURE OF WEALTH. BooTcII. 

right in morality and justice to anything but rent, or compensation 
for its salable value. 



This is simply to say that the ownership of the laud of 
Ireland gave the people who morally owned it the right to 
huy it from those who did not morally own it. 

What was it that hid from this trained logician and 
radically minded man the patent absurdity of saying that 
the individuals called landowners had no right to land, 
except that which is the sum and expression of all ex- 
changeable rights to land— rent ? 

Whoever will examine his writings will see that it was 
his previous acceptance of certain doctrines— doctrines 
with which a succession of ingenious men had endeavored 
to bring into semblance of logical coherence a political 
economy ^dtally defective, and which resembled the elabo- 
rate system of cycles and epicycles with which the ingenu- 
ity of astronomers previous to Copernicus had endeavored 
to account for the movements of the heavenly bodies. 

When an incongruous substance, such for instance as a 
bullet, is implanted in the human body, the physical system, 
as soon as it despairs of its removal, sets about the en- 
deavor to accommodate itself to the incongruity, frequent- 
ly with such success that at length the incongruity is not 
noticed. The stout, masterful man with whom I have just 
now been talking, and whom you might liken to a bull if 
it were not for the intelligence of his face, has long carried 
a bullet under his skin. And men have even been known 
to live for years with bullets in their brains. 

So, too, with philosophical systems. When an incon- 
gruity is accepted in a philosophical system, the abilities 
of its professors are at once set to work to accommodate 
other parts of the system to the incongruity, frequently 
with such success that philosophical systems containing 
fatal incongruities have been known to command aceep- 



Chap. II. CAUSES OF CONFUSION. 139 

tauce for long generations. For the mind of man is even 
more plastic than the body of man, and the human imagi- 
nation, wliich is the chief element in the building up of 
philosophical systems, furnishes a lymph more subtle than 
that which the blood supplies to the bodily system. 

Indeed, the artificialities and confusions by which an 
incongruity is made tolerable to a philosophic system, for 
the very reason that they cannot be understood except by 
those who have submitted their minds to a special course 
of cramping, become to them a seeming evidence of su- 
periority, gratifying a vanity like that of the contortionist 
who has painfully learned to walk a little way on his hands 
instead of his feet and to twist his body into unnatural 
and unnecessary positions ; or like that of the conveyancer 
or lawyer, who has in the same way painfully learned to 
perform such tricks with language. 

And just as the long toleration by the physical system 
of such an incongruity as a bullet, a tumor or a dislocation, 
by reason of the efforts which the system has made to rec- 
oncile to it other parts and functions, renders it more diffi- 
cult of removal or remedy, so the toleration in a philosoph- 
ical system of an incongruity makes its removal or remedy 
far more difficult to those who have bent their minds to 
the system as it has by ingenious men been adapted to the 
incongruity, than it is to those who approach the subject 
from first principles, and who if they may have more to 
learn have less to unlearn. For it is true, as Bacon said, 
that '' a cripple in the right way may beat a racer in the 
wrong one. Nay, the fleeter the racer is who has once 
missed his way, the farther he leaves it behind." 

This, I think, is what was meant in the concise but deep 
philosophy of Christ by such sayings as that the Kingdom 
of Heaven, or system of right-doing, though revealed unto 
babes, is hidden from those deemed wise and prudent, and 
that what the common people heard gladly was foolishness 



140 • THE NATUEE OF "WEALTH. Booh II. 

to the learned scribes and pliarisees. Witli illustrations 
of this principle the history of accepted opinion in every 
time and place abounds. 

It is not to the fancies of childhood that we must look 
for an explanation of the strength of long dominant 
absurdities. Michelet ("The People") truly says: "No 
consecrated absurdity would have stood its ground in this 
world if the man had not silenced the objection of the child." 

But not to depart from the matter in hand : It is evi- 
dent that the existence of a powerful class whose incomes 
could not fail to be endangered by a recognition of the fact 
that what makes them individually wealthy is not any part 
of the wealth of society, but only robbery, must from the 
beginning of the cultivation of political economy in modern 
times have beset its primary step, the determination of 
what the wealth of society consists of, with something of 
the same difficulty that prevented its development in classic 
times. And when the development commenced, and 
especially after it had been taken charge of by the colleges 
and universities, which as at present constituted must be 
peculiarly susceptible to the influence of the wealthy 
classes, it is evident that the efforts of able men to bring 
into some semblance of coherency a system of pohtical 
economy destitute of any clear and coherent definition of 
wealth must have surrounded the subject with greater 
perplexities and helped powerfully to prevent the need of 
a definition of wealth from being felt. 

This is precisely what we see when we examine the dif- 
ferent attempts to define wealth in the economic sense, 
and note the increasing confusions that have attended 
them, culminating in the acceptance of the common mean- 
ing of the word wealth— anything that has exchangeable 
power— as the only meaning that can be given to the eco- 
nomic term; and the consequent abandonment of the 
possibility of a science of j)olitical economy. 



Chaj^.II. CAUSES OF CONFUSION. 141 

Archbishop Whatety, in the chapter on ambiguous terms 
appended to his " Elements of Logic/' says in speaking of 
one of the ambiguities of the word wealth, that which 
led to the use of wealth as synonymous with money : 

The results have been fraud, puuishnaent aud poverty at home, and 
discord aud war without. It has made nations consider the wealth 
of their customers a source of loss instead of profit ; and an advan- 
tageous market a cm-se instead of a blessing. By inducing them to 
refuse to profit by the peculiar advantages in climate, soil or indus- 
try, possessed by their neighbors, it has forced them in a great 
measure to give up their own. It has for centimes done more, and 
perhaps for centuries to come will do more, to retard the improve- 
ment of Europe than all other causes put together. 

In this, the Archbishop, though famous as a logician, 
" puts the cart before the horse." 

These are not the effects of the confusion of a term. 
The confusion of the term is one of the effects of the in- 
fluence upon thought of the same special interest that in 
its efforts to give wealth to individuals at the expense of 
the general wealth, has done and is doing all this. 

Nor can this power of a great pecuniary interest to 
affect thought, and especially to affect thought in those 
circles of society whose opinions are most respected, ever 
be done away with save by the abolition of its cause— the 
social adjustment or institution that gives power to obtain 
wealth without earning it. The pecuniary interest in the 
ownership of slaves was never very large in the United 
States. But it so dominated the thought of the whole 
country that up to the outbreak of the civil war the term 
abolitionist was to good, kindly and intelligent people 
even in the North an expression that meant everything 
vile and wicked. And whatever else might have been the 
issue of the war, had the peciiniary interest in the main- 
tenance of slavery remained, it would still have continued 
to show itself in thought. But as soon as the supplies of 



142 THE NATURE OF WEALTH. Booh II. 

the slave-owning interest were cut off by the freeing of 
the slaves this power upon opinion vanished. Now, no 
preacher, professor or politician, even in the South, would 
think of advocating or defending slavery ; and in Boston, 
where he narrowly escaped mobbing, stands a public statue 
of William Lloyd Garrison. 



CHAPTER III. 
WHAT ADAM SMITH MEANT BY WEALTH. 

SHOWING HOW ESSENTIALLY ADAM SIHTH'S PRBIARY CON- 
CEPTION OF WEALTH DIFFERED FROM THAT NOW HELD 
BY HIS SUCCESSORS. 

Significance of the title "Wealth of Nations"— Its origin shown in 
Smith's reference to the Physiocrats— His conception of wealth 
in his introdnction— Objection by Malthus and by Macleod— 
Smith's primary conception that given in " Progress and Poverty " 
—His subsequent confusions. 

F, considering the increasing indefiniteness among pro- 
fessed economists as to the nature of wealth, we com- 
pare Adam Smith's great book with the treatises that have 
succeeded it, we may observe on its very title-page some- 
thing usually unnoticed, but really very significant. Adam 
Smith does not propose an inquiry into the nature and 
causes of wealth, but "an inquiry into the nature and 
causes of the tveaUh of nations." 

The words I here italicize have become the descriptive 
title of the book. This is known, not as " Adam Smith's 
Inquiry," or "Adam Smith's Wealth," but as "Adam 
Smith's Wealth of Nations." Yet these limiting words, 
"of nations," seem to have been little noticed and less 
understood by the writers who in increasing numbers for 
almost a hundred years have taken this great book as a 

143 



144 THE NATURE OF WEALTH. Booh II. 

basis for their elucidations and supposed improvements. 
Their assumption seems to be that it is wealth generally or 
wealth without limitation which Adam Smith treats of and 
which is the proper subject of political economy, and that 
if he meant anything by his determining words "of na- 
tions," he referred to such political divisions as England, 
France, Holland, etc. 

Some superficial plausibility is perhaps given to this 
view from the fact that one of the divisions of the '' Wealth 
of Nations," Book III., is entitled " Of the Different Prog- 
ress of Opulence in Different Nations," and that in it illus- 
trative reference is made to various ancient and modern 
states. But that in his choice of the limiting words " of 
nations " as indicating the kind of wealth into the nature 
and causes of which he proposed to inquire, Adam Smith 
referred to something other than the political divisions of 
mankind called states or nations, is sufficiently clear. 

While he is, as I have said, not very definite and not 
entirely consistent in his use of the term wealth, yet it 
is certain that what he meant by '' the wealth of nations," 
of the nature and causes of which he proposed to inquire, 
was something essentially different from what is meant by 
wealth in the ordinary use of the word, which includes as 
wealth everything that may give wealthiness to the indi- 
vidual considered apart from other individuals. It was 
that kind of wealth the production of which increases and 
the destruction of which decreases the wealth of society as 
a whole, or of mankind collectively, which he sought to 
distinguish from the word "wealth" in its common or 
individual sense by the limiting words, " of nations," in the 
meaning not of the larger pohtical divisions of mankind, 
but of societies or social organisms. 

In the body of the "Wealth of Nations" there occurs 
again the phrase which furnished Adam Smith the title 
for his ten years' work. In Book IV., speaking of those 



Chap. III. WHAT SMITH MEANT BY WEALTH. 145 

members of " the French republic of letters " who at that 
time called themselves and were called " Economists," but 
who have been since distinguished from other economists, 
real or pretended, by the name of Physiocrats,*— a school 
who might be better still distinguished as the Single Taxers 
of the Eighteenth Century, he says (the italics are mine) : 

This sect, in their works, which are very numerous, and which 
treat not only of what is properly called political economy, or of the 
natnre and causes of the wealth of nations, but of every other branch 
of the system of civil government, all follow implicitly, and without 
any sensible variation, the doctrines of Mr. Quesnai. 

This recognition of the fact that, not wealth in the loose 
and common sense of the word, but that which is wealth 
to societies considered as wholes, or as he phrased it, " the 
wealth of nations," is the proper subject-matter of what is 
properly called political economy— shows the origin of the 
title Adam Smith chose for his book. He had doubtless 
thought of calling it a "Political Economj^," but either 
from the consciousness that his work was incomplete, or 
from the modesty of his real greatness, finally preferred 
the less pretentious title, which expressed to his mind the 
same idea, ''An inquiry into the Nature and Causes of 
the Wealth of Nations." 

It has been much complained of Adam Smith that he 
does not define what he means by wealth. But this has 
been exaggerated. In the very first paragraph of the 
introduction to his work he thus explains what he means 
by the wealth of nations, the only sense of the word wealth 
which it is the business " of what is properly called politi- 
cal economy" to consider : 



* From, jjhysiocratie, or government in the nature of things, or nat- 
ural order, a name suggested, in 1768, by Dupont de Nemours, one 
of the most active of their number. 



146 THE NATUEE OF WEALTH. Booh II. 

The anniial labor of every nation is the fund which originally sup- 
plies it with all the necessaries and conveniences of life which it 
annually consumes, and which consist always either in the immedi- 
ate produce of that labor, or in what is piu'chased with that produce 
from other nations. 

Again, in the last sentence of this introduction he speaks 
of " the real wealth, the annual produce of the land and 
labor of the society." And in other places throughout the 
book he also speaks of this wealth of society or wealth of 
nations, or real wealth, as the produce of land and labor. 

What he meant by the produce of land and labor was of 
course not the produce of land plus the produce of labor, 
but the joint produce of both— that is to say : the result of 
labor, the active factor of all production, exerted upon land, 
the passive factor of all production, in such a way as to fit 
it (land or matter) for the gratification of human desires. 
Malthus, indorsed by McCulloch and a long line of com- 
mentators upon Adam Smith, objects to his definition that 
" it includes all the useless products of the earth, as well 
as those which are appropriated and enjoyed by man." 
And in the same way Macleod, a recent writer whose ability 
to say clearly what he wants to say makes his " Elements 
of Economics," despite its essential defects, a grateful relief 
among economic writings, objects that if — 

the annual produce of land and labor, either separately or combined, 
is wealth, then every useless product of the earth is wealth, as well 
as the most useful— the tares as well as the wheat. If a diver fetch 
a pearl oyster from the deep sea, the shell is as much the " produce 
of land and labor " as the pearl itself. So if a nugget of gold or a 
diamond is obtained from a mine, the rubbish it is found in and 
brought up with is as much the "produce of land and labor" as the 
gold or the diamond ; and innumerable instances of this sort may be 
cited. 

The communication of thought by speech would be at 
an end if Adam Smith could be asked to explain that the 



Cliai^.in. WHAT SMITH MEANT BY WEALTH. 147 

produce of labor means what the labor is exerted to get, 
not what it is incidentally obliged to remove in the xorocess 
of getting that. Yet most of the complaints of his failure 
to say what he means by wealth have no better basis than 
these objections. 

In truth whoever will attend to the obvious meaning of 
the word he uses will see that what Adam Smith meant by 
" the wealth of nations " or wealth in the sense it is to be 
considered in " what is properly called political economy," 
is in reality what in the chapter of '' Progress and Poverty " 
entitled " The Meaning of the Terms " (Book I., Chapter II.) 
is given as the proper meaning of the economic term— 
namely, that of '^ natural products that have been secured, 
moved, combined, separated, or in other ways modified by 
human exertion, so as to fit them for the gratification of 
human desires." 

Through the first and most important part of his work, 
this is the idea which Smith has constantly in mind and 
to which he constantly adheres in tracing all production 
of wealth to labor. But having grasped this idea of the 
nature of wealth without having clearly defined its relation 
to other ideas still lying in his mind, he falls into the sub- 
sequent confusion of also classing personal qualities and 
debts as wealth. 



CHAPTER IV. 
THE FRENCH PHYSIOCRATS. 

SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE 
OF POLITICAL ECONOJIY WERE, AND WHAT THEY HELD. 

Quesnay aud his followers— The great truths they grasped and the 
cause of the confusion into which they fell— This used to dis- 
credit their whole system, but not really vital— They were real 
free traders— The scant justice yet done them— Reference to 
them in "Progress and Poverty"— Macleod's statement of their 
doctrine of natural order— Their conception of wealth— Their 
day of hope and their fall. 

THE first developers in modern times of something 
like a true science of political economy, or, rather 
(since social trnths, though they may be covered up and 
for a while ignored, must since the origin of human so- 
ciety always have been here to be seen), the men who fii'st 
got a hearing large enough and wide enough to bring 
down their names and their teachings to our times, were 
the French philosophers whom Adam Smith speaks of in 
the sentence before quoted, as the sect who ''aU follow 
implicitly, and without any sensible variation, the doctrines 
of Mr. Quesnai." 
Y Francois Quesnai, or Quesnay, as the name is now usu- 
ally speUed, a French philosopher, who, as McCuUoch says, 
was " equally distinguished for the subtlety and originality 
of his understanding and the integrity and simplicity of 
his character," was born June 4, 1694, twenty-eight years 

148 



Chap. IV. THE FRENCH PHYSIOCRATS. 149 

before Adam Smith, at Mercy, some ten leagues from Paris. 
Beginning life in the manual labor of the farm, he was 
without either the advantages or, as they often prove to 
men of parts, the disadvantages of a scholastic education. 
With much effort he taught himself to read, became ap- 
prentice to a surgeon, and at length began practice for 
himself at Mantes, where he acquired some means and 
came to the knowledge of Marshal de Noailles, who spoke 
of him to the queen, who in her turn recommended him 
to the king. He finally settled in Paris, bought the place 
of physician to the king, and was made by the monarch 
his first physician. Abstaining from the intrigues of the 
coui't, he won the sincere respect of Louis XV., with whom 
as his first physician he was brought into close personal 
contact. The king made him a noble, gave him a coat of 
arms, assigned him apartments in the palace, calling him 
affectionately his thinker, and had his books printed in 
the royal printing-office. And around him, in his apart- 
ments in the palace of Versailles, this "King's Thinker" 
was accustomed to gather a group of eminent men who 
joined him in an aim the grandest the human mind can 
entertain— being nothing less than the establishment of 
liberty and the abolition of poverty among men, by the 
conformation of human laws to the natural order intended 
by the Creator. 

These men saw what has often been forgotten amid the 
complexities of a high civilization, but is yet as clear as 
the sun at noonday to whoever considers first principles. 
They saw that there is but one som-ce on which men can 
draw for all their material needs— land ; and that there is 
but one means by which land can be made to yield to 
their desires— labor. All real wealth, they therefore saw, 
all that constitutes or can constitute any part of the wealth 
of society as a whole, or of the wealth of nations, is the 
result or product of the application of labor to land. ^/ 



160 THE NATURE OF WEALTH. Book 11. 

They had not only grasped this first principle— from 
which any true economy, even that of a savage tribe or an 
isolated individual, must start— but they had grasped the 
central principle of a true political economy. This is the 
principle that in the natural growth of the social organism 
into which men are integrated in society there is developed 
a fund which is the natural provision for the natural needs 
of that organism— a fund which is not merely sufficient 
for all the material wants of society, and may be taken 
for that purpose, its intended destination, without depriv- 
ing the unit of anything rightfully his ; but which must be 
so taken to prevent the gravest injuries to individuals and 
the du-est disasters to the state. 

This fund Quesnay and his followers styled the produit 
net— the net, or surplus, or remaining, product. They 
called it this, evidently because they saw it as something 
which remained, attached, as it were, to the control of 
land, after all the expenses of production that are resolvable 
into compensation for the exertion of individual labor are 
paid. What they really meant by the p)'>'odiiit net, or net 
product, is precisely what is properly to be understood in 
English by the word " rent " when used in the special sense 
or technical meaning which it has acquired since Ricardo's 
time as a term of political economy. Net product is really 
a better term than rent, as not being so liable to confusion 
with a word in constant use in another sense ; and John 
Stuart Mill, probably without thought of the Physiocrats, 
came very close to the perception that governed their 
choice of a term when he spoke of economic rent as " the 
unearned increment of land values." 

That Quesnay and his associates saw the enormous sig- 
nificance of this ^' net product " or '' unearned increment " 
for which our economic term is '' rent," is clear from their 
practical proposition, the impot vnique, or single tax. By 
this they meant just what its modern advocates now mean 



CJiai). IV. THE FRENCH PHYSIOCRATS. 151 

by it— the abolition of all taxes whatever on the making, 
the exchanging or the possession of wealth in any form, 
and the recourse for public revenues to economic rent; 
the net or surplus product ; the (to the individual) unearned 
increment which attaches to land wherever in the progress 
of society any particular piece of land comes to afford to 
the user superior opportunities to those obtainable on land 
that any one is free to use. 

In grasj)ing the real meaning and intent of the net prod- 
uct, or economic rent, there was opened to the Physiocrats 
a true system of political economy— a system of harmonious 
order and beneficent purpose. They had grasped the key 
without which no true science of political economy is pos- 
sible, and from the refusal to accept which the scholastic 
economy that has succeeded Adam Smith is, after nearly 
a hundred years of cultivation, during which it has sunk 
into the contemptible position of '' the dismal science," now 
slipping into confessed incompetency and rejection. 

But misled by defective observation and a habit of 
thought that prevailed long after them, and indeed yet 
largely prevails (a matter to which I shall subsequently 
more fully allude), the Physiocrats failed to perceive that 
what they called the net or surplus product, and what we 
now call economic rent, or the unearned increment, may 
attach to land used for any purpose. Looking for some 
explanation in natural law of what was then doubtless 
generally assumed to be the fact, and of which I know of 
no clear contradiction until " Progress and Poverty " was 
written, that agriculture is the only occupation which 
yields to the landlord a net or surplus product, or unearned 
increment (rent), over and above the expenses of produc- 
tion, they not unnaturally under the circumstances hit 
upon a striking difference between agriculture, which 
grows things, and the mechanical and trading occupations, 
which merely change things in form, place or ownership, 



152 THE NATUEE OF WEALTH. Booh II. 

as furnisliing the explanation for which they were in 
search. This difference lies in the use which agriculture 
makes of the generative or reproductive principle in 
natiu-e. 

This supposed fact, and what seemed to them the ra- 
tional explanation of it, in the peculiar use made in agri- 
culture of the principle of growth and reproduction which 
characterizes all forms of life, vegetable and animal, the 
Physiocrats expressed in their terminology by styling 
agriculture the only productive occupation. AU other 
occupations, however useful, they regarded as sterile or 
barren, insomuch as under the fact assumed such occu- 
pations give rise to no net produce or unearned increment, 
merely returning again to the general fund of wealth, or 
gross product, the equivalent of what they had taken from 
it in changing the form, place or ownership of material 
things already in existence. 

This was their great and f ata.1 misapprehension, since it 
has been effectually used to discredit their whole system. 

Still, it was not really a vital mistake. That is to say, 
it made no change in their practical proposals. The fol- 
lowers of Quesnay insisted that agriculture, in which they 
admitted fisheries and mines, was the only productive 
occupation, or in other words the only application of labor 
that added to the sum of wealth ; while manufactures and 
exchange, though useful, were sterile, merely changing the 
form or place of wealth without adding to its sum. They, 
however, proposed no restrictions or disabilities whatever 
on the occupations they thus stigmatized. On the con- 
trary, they were— what the so-called ''English free traders" 
who have followed Adam Smith never yet have been — 
free traders in the full sense of the term. In their practical 
proposition, the single tax, they proposed the only means 
by which the free trade principle can ever be carried to its 
logical conclusion— the freedom not merely of trade, but 



Choi). IF. THE FRENCH PHYSIOCRATS. 153 

of all other forms and modes of production, with full free- 
dom of access to the natural element which is essential to 
all production. They were the authors of the motto that 
in the English use of the phrase ^' Laissez faire!" "Let 
things alone," has been so emasculated and perverted, but 
which on their lips was, ^' Laissez /aire, laissez aller," " Clear 
the ways and let things alone ! " This is said to come 
from the cry that in medieval tournaments gave the signal 
for combat. The English motto which I take to come 
closest to the spirit of the French phrase is, " A fair field 
and no favor ! " 

It is for the reason that of all modern philosophers they 
not only were the first, but were really true free traders, 
that I dedicated to the memory of Quesnay and his fellows 
my "Protection or Free Trade" (1885), saying: 

By thus caiTying the inquiiy beyond the point where Adam Smith 
and the writers who have followed him have stopped, I believe I have 
stripped the vexed tariff question of its greatest difficulties, and have 
cleared the way for the settlement of a dispute which otherwise might 
go on interminably. The conclusions thus reached raise the doctrine 
of free trade from the emasculated form in which it has been taught 
by the English economists to the fullness in which it was held by the 
predecessors of Adam Smith, those illustrious Frenchmen, with whom 
originated the motto " Laissez faire," and who, whatever may have 
been the confusions of their terminology or the faults of their method^ 
gi'asped a central truth which free traders since their time have ignored. 

These French " Economists," now more definitely known 
as Physiocrats, or single taxers, had got hold of what in 
its bearings on philosophy and politics is probably^ the 
greatest of truths ; but had got hold of it through curi- 
ously distorted apprehensions. It was to them, however, 
like a rainbow seen through clouds. They did not see the 
full sweep of the majestic ciu've, and endeavored to piece 
out their lack of insight with a confused and confusing 
terminology. But what they did see showed them its trend, 
and they felt that natural laws could be trusted where 



154 THE NATURE OF WEALTH. Book 11. 

attempts to order the world by human legislation would 
be certain to go astray. 

Yet nothing better shows the importance of correct 
theory to the progress of truth against the resistance of 
powerful special interests than the complete overthrow of 
the Physiocrats. Their mistake in theory has sufficed to 
prevent, or perhaps rather to furnish a sufficient excuse to 
prevent the justice and expediency of their practical pro- 
posal from being considered. 

I know of no English writer on the Physiocrats or their 
doctrines who seems to have understood them or to have 
had any glimmering that the truth which lay behind their 
theory that agriculture is the only productive occupation 
was an apprehension of what has since been known as 
the Ricardian doctrine of rent, carried out further than 
Ricardo carried it, to its logical results ; but apprehended, 
as indeed Ricardo himself seems to have apprehended it, 
only in its relations to agriculture. 

In "Progress and Poverty," after working out what I 
believe to be the simple yet sovereign remedy for the con- 
tinuance of wide-spread poverty amid material progress, I 
thus, in the chapter entitled "Indorsements and Objec- 
tions" (Book VIII., Chapter IV.), refer to the Physiocrats : 

In fact, that rent should, both on grounds of expediency and jus- 
tice, be the peculiar subject of taxation, is involved in the accepted 
doctrine of rent, and may be found in embryo in the works of all 
economists who have accepted the law of Ricardo. That these prin- 
ciples have not been pushed to their necessary conclusions, as I have 
pushed them, evidently arises from the indisposition to endanger or 
offend the enormous interest involved in private ownership in land, 
and from the false theories in regard to wages and the cause of pov- 
erty which have dominated economic thought. 

But there has been a school of economists who plainly perceived, 
what is clear to the natural perceptions of men when xminflueneed 
by habit— that the revenues of the common property, land, ought to 
be appropriated to the common service. The French Economists of 
the last century, headed by Quesnay and Turgot, proposed just what 



Chap. IV. THE FEENCH PHYSIOCRATS. 155 

I have proposed, that all taxation should be abolished save a tax upon 
the value of land. As I am acquainted with the doctrines of Ques- 
nay and his disciples only at second hand through the medium of the 
English writers, I am imable to say how far his peculiar ideas as to 
agricultm'o being the only productive avocation, etc., are erroneous 
apprehensions, or mere peculiarities of terminology. But of this I 
am certain from the proposition in which his theory culminated— that 
he saw the fundamental relation between land and labor which has 
since been lost sight of, and that he arrived at practical truth, though, 
it may be, through a course of defectively expressed reasoning. 
The causes which leave in the hands of the landlord a "produce 
net" were by the Physiocrats no better explained than the suc- 
tion of a pump was explained by the assumption that natui'e abhors 
a vacuum ; but the fact in its practical relations to social economy 
was recognized, and the benefit which would result from the perfect 
freedom given to industry and trade by a substitution of a tax on 
rent for all the impositions which hamper and distort the application 
of labor, was doubtless as clearly seen by them as it is by me. One 
of the things most to be regi-etted about the French Revolution is 
that it overwhelmed the ideas of the Economists, just as they were 
gaining strength among the thinking classes, and were apparently 
about to influence fiscal legislation. 

Without knowing anything of Quesnay or his doctrines, I have 
reached the same practical conclusion by a route which cannot be 
disputed, and have based it on grounds which cannot be questioned 
by the accepted political economy. 

The best English account of the Physiocratic views that 
I now know of is that given by Henry Dunning Macleod, 
in his "Elements of Economics" (1881). He seems to 
have no notion of the truth that lay at the bottom of a 
mistake that has caused theii* great services to be all but 
forgotten, and which I shall take opportunity in a subse- 
quent book more fully to explain. To him it is " simply 
incomprehensible how men of the ability of the Physio- 
crats could maintain that a country could not be enriched 
by the labor of artisans and by commerce." This he styles 
" one of those aberrations of the human intellect which we 
can only wonder at and not explain." But nevertheless 
he awards them the honor of being the founders of the 



156 THE NATUEE OF WEALTH. Book II. 

science of political economy, declares that in spite of their 
errors ''they are entitled to imperishable glory in the his- 
tory of mankind," and gives in his own language an out- 
line of their doctrine, from which (Book I., Chapter V., 
Sec. 3) I take the following : 

The Creator has placed man upon the earth with the evident in- 
tention that the race should prospei-, and there are certain physical 
and moral laws which conduce in the highest degree to ensvire his 
preservation, increase, well-being, and improvement. The correla- 
tion between these physical and moral laws is so close that if either 
be misunderstood, through ignorance or passion, the others are also. 
Physical nature, or matter, bears to mankind very much the relation 
which the body does to the soul. Hence the perpetual and necessary 
relation of physical and moral good and evil on each other. 

Natural justice is the conformity of human laws and actions to 
natural order, and this collection of physical and moral laws existed 
before any positive institutions among men. And while their obser- 
vance produces the highest degree of prosperity and well-being 
among men, the non-observance or transgression of them is the cause 
of the extensive physical evils which afflict mankind. 

If such a natural law exists, oui- intelligence is capable of imder- 
standing it ; for, if not, it would be useless, and the sagacity of the 
Creator would be at fault. As, therefore, these laws are instituted 
by the Supreme Being, all men and all states ought to be governed 
by them. They are immutable and irrefragable, and the best possi- 
ble laws : therefore necessarily the basis of the most perfect govern- 
ment, and the fundamental rule of all positive laws, which are only 
for the purpose of upholding natural order, evidently the most 
advantageous for the human race. 

The evident object of the Creator being the preservation, the in- 
crease, the well-being, and the improvement of the race, man neces- 
sarily received from his origin not only intelligence, but instincts 
conformable to that end. Every one feels himself endowed with the 
triple instincts of well-being, sociability, and justice. He imderstands 
that the isolation of the brute is not suitable to his double nature, 
and that his physical and moral wants m-ge him to live in the society 
of his equals in a state of peace, good-will, and concord. 

He also recognizes that other men, having the same wants as him- 
self, cannot have less rights than himself, and therefore he is bound 
to respect this right, so that other men may observe a similar obli- 
gation towards him. 



Chap. IV. THE FEENCH PHYSIOCRATS. 157 

These ideas— the product of reason, the necessity of work, the 
necessity of society, and the necessity of justice— imply three others 
—liberty, property, and authority, which are the three essential terms 
of all social order. 

How could man understand the necessity of labor to obey the ir- 
resistible instinct of his preservation and well-being, without con- 
ceiving at the same time that the instrument of labor, the physical 
and intellectual qualities with which he is endowed by nature, be- 
longs to him exclusively, without perceiving that he is master and 
the absolute proprietor of his person, that he is born and should re- 
main free? 

But the idea of liberty cannot spring up in the mind without asso- 
ciating with it that of property, in the absence of which the first 
would only represent an illusory right, without an object. The free- 
dom the individual has of acquiring useful things by labor supposes 
necessarily that of preserving them, of enjoying them, and of dispos- 
ing of them without reserve, and also of bequeathing them to his 
family, who prolong his existence indefinitely. Thus liberty con- 
ceived in this manner becomes property, which may be conceived in 
two aspects as it regards movable goods on the earth, which is the 
source from which labor ought to draw them. 

'"'^At fii'st property was principally movable ; but when the cultiva- 
tion of the earth was necessary for the preservation, increase, and 
improvement of the race, individual appropriation of the soil became 
necessary, because no other system is so proper to draw from the 
earth all the mass of utilities it can produce ; and, secondly, because 
the collective constitution of property would have produced many 
inconveniences as to sharing of the fruits, which would not arise 
from the di%'ision of the land, by which the rights of each are fixed 
in a clear and definite manner. Property in land, therefore, is the 
necessary and legitimate consequence of personal and movable prop- 
erty. Every man has, then, centered in him by the laws of Provi- 
dence, certain rights and diities ; the right of enjoying himself to the 
utmost of his capacity, and the duty of respecting similar rights in 
others. The perfect respect and protection of reciprocal rights and 
duties conduces to production in the highest degree, and the obtain- 
ing the greatest amount of physical enjoyments. 

The Physiocrats, then, placed absolute freedom, or property— as 
the fundamental right of man— freedom of Person, freedom of Opin- 
ion, and freedom of Contract, or Exchange ; and the violation of 
these as contrary to the law of Providence, and therefore the cause 
of all evil to man. Quesnay's first publication, "Le Droit Naturel," 



158 THE NATURE OF WEALTH. Book 11. 

contains an inquiry into these natural rights ; and he afterwards, in 
another called " General Maxims of the Economical Government of 
an Agi'icultiu-al Elingdom," endeavored to lay down in a series of 
thirty maxims, or fundamental general principles, the whole bases 
of the economy of society. The 23d of these declares that a nation 
suffers no loss by trading with foreigners. The 24th declares the 
fallacy of the doctrine of the balance of trade. The 25th says : " Let 
entire freedom of commerce be maintained; for the regulation of 
commerce, both internal and external, the most sure, the most true, 
the most profitable to the nation and to the state, exists in entire 
freedom of competition." In these three maxims, which Quesnay 
and his followers developed, was contained the entire overthrow of 
the existing system of Political Economy ; and notwithstanding cer- 
tain errors and shortcomings, they are unquestionably entitled to be 
considered as the founders of the science of Political Economy. 

Wealth, in tlie economic sense of the wealth of societies, 
or the wealth of nations, Maeleod goes on to state, the 
Physiocrats held to consist exclusively of material things, 
drawn from land— to man the source of all material tilings 
— by the exertion of labor, and possessing value in ex- 
change, or exchangeability ; a distinction which they recog- 
nized as essentially different from, and not necessarily 
associated with, value in use or usefulness. That man 
can neither create nor annihilate matter they repeated 
again and again in such phrases as: "Man can create 
nothing," and " Nothing can come out of nothing." They 
expressly excluded land itself and labor itself, and all 
personal capacities and powers and services, from the 
category of wealth, and were far ahead of their time in 
deriving the essential quality of money from its use in 
serving as a medium of exchange, and in including all 
usury laws in the restrictions that they would sweep 
away. 

That these men rose in France, and as it were in the 
very palace of the absolute king, just as the rotten Bour- 
bon dynasty was hastening to its faU, is one of the most 
striking of the paradoxes with which history abounds. 



Chap. IV. THE FRENCH PHYSIOCRATS. 1B9 

Never, before nor since, ont of the night of despotism 
gleamed there such clear light of liberty. 

They were deluded by the idea— the only possibility in 
fact, under existing conditions of carrying their views into 
effect in their time — that the power of a king whose pre- 
decessor had said, " I am the state ! " might be utilized to 
break the power of other special interests, and to bring lib- 
erty and plenty to France, and through France to the world. 

They had theii* day of hope, and almost it must have 
seemed of assured triumph, when in 1774, three months 
before Quesnay's death, Turgot was made Finance Minister 
of Louis XVI., and at once began clearing the ways by 
cutting the restrictions that were stifling French industry. 
But they leaned on a reed. Turgot was removed. His 
reforms were stopped. The pent-up misery of the masses, 
which they had been so largely instrumental in showing 
utterly repugnant to the natural order, burst into the blind 
madness of the great revolution. The Physiocrats were 
overthrown, many of them perishing on the guillotine, in 
prison or in exile. In the reaction which the excesses of 
that revolution everywhere produced among those most 
influencing thought, the propertied and the powerful, the 
Physiocrats were remembered merely by their unfortunate 
misapprehension in regarding agriculture as the only pro- 
ductive occupation. 

France will some day honor among the noblest the cen- 
turies have given her the names of Quesnay, and Gournay, 
and Turgot, and Mirabeau, and Condorcet, and Dupont, 
and their fellows, as we shall have in English, intelligent 
explanations, if not translations of their works. But, 
probably for the reason that France has as yet felt less 
than the English and Teutonic and Scandinavian nations 
the influence of the new philosophy of the natiural order, 
best known as the Single Tax, the teachings of these men 
seem at present, even in France, to be practically forgotten. 



CHAPTER V. 
ADAM SMITH AND THE PHYSIOCRATS. 

SHOWING THE RELATION BETWEEN ADAM SMITH AND THE 
PHYSIOCRATS. 

Smith and Quesnay— The "Wealth of Nations-" and Physiocratic 
ideas— Smith's criticism of the Physiocrats— His failure to ap- 
preciate the single tax— His prudence. 

ON the continental trip he made between 1764 and 
1766, after resigning his Glasgow professorship of 
moral philosophy to accompany as tutor the young Duke of 
Buccleuch, Adam Smith made the personal acquaintance 
of Quesnay and some of the "men of great learning and 
ingenuity," who regarded the "King's Thinker" with an 
admiration "not inferior to that of any of the ancient 
philosophers for the founders of their respective systems/' 
and was, while in Paris, a frequent and welcome visitor at 
the apartments in the palace, where, unmindful of the 
gaieties and intrigues of the most splendid and corrupt 
court of Europe that went on but a floor below them, this 
remarkable group discussed matters of the highest and 
most permanent interest to mankind. 

This must have been a fruitful tmie in Adam Smith's 
intellectual life. During this time the almost unknown 
Scottish tutor, notable among his few acquaintances for 
his fits of abstraction, must have been mentally occupied 

160 



Chap.V. SMITH AND THE PHYSIOCRATS. 161 

■with the work which ten years after was to begin a fame 
that for more than a century has kept him at tlie very head 
of economic philosophers and in the first rank of the per- 
manently illustrious men of his generation. 

Upon this work he entered immediately after his return 
from the continent, in the leisure afforded him by the 
ample pension that the trustees of the Duke had agi-eed 
should continue until he could be provided with a profit- 
able government place. The Duke himself, on coming to 
his majority and estates, seems to have made no effort to 
release himself from this payment by securing such a 
place for the man whom he always continued to regard 
■with respect and affection, thinking doubtless that its 
duties, however nearly nominal, might somewhat interfere 
with his freedom to devote himself to his long work. And 
when, the " Wealth of Nations " ha-dng been at last pub- 
lished, its author was appointed by Lord North to be one 
of the Commissioners of Customs in Scotland— an appoint- 
ment which seems to have been due to the gratitude of the 
Premier for hints received from that book as to new 
sources of taxation rather than to any pressure of the 
Buccleuch interest, and which raised the simple-mannered 
student to comparative opulence— the Duke insisted on 
making no change in his payment, but continued the 
pension for life. 

The " liberal and generous system " of the French Econ- 
omists could not fail to appeal powerfully to a man of 
Adam Smith's disposition, and the " Wealth of Nations " 
bears ample e^vddence of the depth of the opinion he in one 
place expresses in terms, that this system, "with all its 
imperfections, is perhaps the nearest approximation to the 
truth that has yet been published upon the subject of 
political economy." It was indeed his original intention 
as stated to his friend and biographer, Professor Dugald 
Stewart, to dedicate to Quesnay the fruits of his ten years' 



162 THE NATUEE OF WEALTH. Booh II. 

application. But the French philosopher died in 1774. 
two years before the Scotsman's great work saw the light. 
Thus it appeared without any indication of an intention 
which, had it been expressed, might, in the bitter prejudice 
soon afterwards aroused against the Physiocrats by the 
outbreak of the French Revolution, have seriously mili- 
tated against its usefulness. 

The resemblance of the views expressed in this work to 
those held by the Physiocrats has, however, been noticed 
by all critics, and both on the side of their opponents and 
their advocates there have not been wanting intimations 
that Smith borrowed from them. But while he must have 
been eminently ready to absorb any idea that commended 
itself to his mind, there is no reason to regard these views 
as not originally Adam Smith's own. The keenness of 
observation and analysis, the vigor of imagination and 
solidity of learning, that characterize the "Wealth of Na- 
tions " are shown in the " Theory of the Moral Sentiments," 
written before Smith had left the University of Glasgow, 
and which indeed led to the invitation that he should ac- 
company the young nobleman on his trip. They are shown 
as well in the paper on the formation of languages, and 
the papers on the principles which lead and direct philo- 
sophical inquiry, as illustrated in the history of various 
sciences, which are usually published with that work. It 
appears from the " Theory of the Moral Sentiments " that 
Adam Smith was even then meditating some such a book 
as the "Wealth of Nations," and there is no reason to 
suppose that without knowledge of the Physiocrats it 
would have been essentially different. 

It is a mistake to which the critics who are themselves 
mere compilers are liable, to think that men must di-aw 
from one another to see the same truths or to fall into the 
same errors. Trutli is, in fact, a relation of things, which 
is to be seen independently because it exists independently. 



Chap.V. SMITH AND THE PHYSIOCRATS. 163 

Error is perhaps more likely to indicate transmission from 
mind to mind; yet even that usually gains its strength 
and permanence from misapprehensions that in them- 
selves have independent plausibility. Such relations of 
the stars as that appearance in the north which we call 
the Dipper or Great Bear, or as that in the south which 
we call the Southern Cross, are seen by all who scan the 
starry heavens, though the names by which men know 
them are various. And to think that the sun revolves 
around the earth is an error into which the testimony of 
their senses must cause all men independently to fall, 
until the first testimony of the senses is corrected by 
reason applied to wider observations. 

In what is most important, I have come closer to the 
views of Quesnay and his followers than did Adam Smith, 
who knew the men personally. But in my case there was 
certainly no derivation from them. I well recall the day 
when, checking my horse on a rise that overlooks San 
Francisco Bay, the commonplace reply of a passing team- 
ster to a commonplace question, crystallized, as by light- 
ning-flash, my brooding thoughts into coherency, and I 
there and then recognized the natural order— one of those 
experiences that make those who have had them feel there, 
after that they can vaguely appreciate what mystics and 
poets have called the "ecstatic vision." Yet at that time 
I had never heard of the Physiocrats, or even read a line 
of Adam Smith. 

Afterwards, with the great idea of the natural order in 
my head, I printed a little book, "Our Land and Land 
Policy," in which I urged that all taxes should be laid on 
the value of land, irrespective of improvements. Casually 
meeting on a San Francisco street a scholarly lawyer, 
A. B. Douthitt, we stopped to chat, and he told me that 
what I had in my little book proposed was what the French 
" Economists " a hundred years before had proposed. 



164 THE NATURE OF WEALTH. Book IL 

I forget many things, but tlie place where I heard this, 
and the tones and attitude of the man who told me of it, 
are photographed on my memory. For, when you have 
seen a truth that those around you do not see, it is one of 
the deepest of pleasures to hear of others who have seen 
it. This is true even though these others were dead years 
before you were born. For the stars that we of to-day see 
when we look were here to be seen hundreds and thou- 
sands of years ago. They shine on. Men come and go, 
in their generations, like the generations of the ants. 

This pleasure of a common appreciation of truth not yet 
often accepted, Adam Smith must have had from his in- 
tercourse with the Physiocrats. Widely as he and they 
may have differed, there was yet much that was common 
in their thought. He was a free trader as they were, 
though perhaps not so logical and thorough-going. And 
though differing in temper and widely differing in condi- 
tions, both were bent on struggling against what must 
have seemed at the time insuperable difficulties. 

Adam Smith's knowledge of, and admiration for, the 
Phj^siocrats must at least have affected his thought and 
expression, sometimes by absorption and sometimes per- 
haps by reaction. But no matter how much of his eco- 
nomic ^dews were original with him and how much he 
imbibed consciously or unconsciously from them, it is 
certain that his political economy, as far as it goes on all 
fours, is the system of natural order proclaimed by them. 

Wliat Adam Smith meant by the wealth of nations is in 
most cases, and wherever he is consistent, the material 
things produced from land by labor which constitute the 
necessities and conveniences of human life ; the aggregate 
produce of societj'', using the word produce as expressive 
of the sum of material results, in the same way that we 
speak of agricultural produce, of factory produce, of the 
produce of mines, or fisheries, or the chase. Now this is 



Chap.V. SMITH AND THE PHYSIOCRATS. 165 

what the Physiocrats meant by wealth, or as they some- 
times termed it, the gross product of land and labor. 

But this is also, as I shall hereafter show, the primary 
or root meaning of the word wealth in its common use. 
And whoever will read Smith's " Considerations Concerning 
the First Formation of Languages," originally published 
with his "Moral Sentiments," in 1759, will see from his 
manner of tracing words to theii' primary uses, that when- 
ever he came to think of it, he would have recognized the 
original and true meaning of the word wealth to be that 
of the necessities and conveniences of human life, brought 
into being by the exertion of labor upon land. 

The difference between Smith and the Physiocrats is 
this : 

The Physiocrats, on their part, clearly laid down and 
steadily contended that nothing that did not have material 
existence, or was not produced from land, could be included 
in the category of the wealth of society. Adam Smith, how- 
ever, with seeming inadvertence, has fallen in places into 
the inconsistency of classing personal qualities and obhga- 
tions as wealth. This is probably attributable to the fact 
that what it seemed to him possible to accomplish was 
much less than what the Physiocrats aimed at. The task 
to which he set himself, that in the main of showing the 
absurdity and impolicy of the mercantile or protective 
system, was sufficiently difficult to make him comparatively 
regardless of speculations that led far beyond it. With 
the disproval of the current notion that the wealth of 
nations consists of the precious metals, his care as to what 
is and what is not a part of that wealth relaxed. He went 
with the Physiocrats in their condemnation of the attempts 
of governments to check commerce, but stopped both 
where they had carried tha idea of freeing all production 
from tax or restraint to the point of a practical proposi- 
tion, and where they had fallen into obvious error. He 



166 THE NATUEE OF WEALTH. Book II. 

neither proposed the single tax nor did he fall into the 
mistake of declaring agriculture the only productive occu- 
pation. That there is a natui-al order he saw ; and that 
to this natural order our perceptions of justice conform, 
he also saw. But that involved in this natural order is a 
provision for the material needs of advancing society he 
seems never to have seen. 

Whether Adam Smith's failure to grasp the great truth 
that the French "Economists" perceived, though "as 
through a glass, darkly," was due to their erroneous way 
of stating it, or to some of those environments of the 
individual mind which seem on special points to close its 
powers of perception, there is no means that I know of for 
determining. Adam Smith saw that the Physiocrats must 
be wrong in regarding manufactures and exchanges as 
sterile occupations, but he did not see the true answer to 
their contention, the answer that would have brought into 
the light of a larger truth that portion of truth they had 
wrongly apprehended. The answer he makes to them in 
Book IV., Chapter IX., of the " Wealth of Nations " could 
hardly have been entirely satisfactory to himself. In this 
he does not venture to contend that the labor of artificers, 
manufacturers and merchants is as productive of wealth 
as the labor of agriculturists. He only contends that it is 
not to be considered as utterly sterile, and that " the rev- 
enue of a trading and manufacturing country must, other 
things being equal, always be much greater than that of 
one without trade and manufactures," because " a smaller 
quantity of manufactured produce purchases a great 
quantity of rude produce." That he himself, indeed, re- 
garded agriculture as at least the most productive of occu- 
pations is shown directly in other places in his great work. 

And there is one part of this answer that is extremely 
unsatisfactory and utterly out of its author's usual temper. 
No one better than Adam Smith could see the fallacy of 



Chap.V. SMITH AND THE PHYSIOCRATS. 167 

comparing a philosopher who declared that the political 
body would thrive best under conditions of perfect liberty 
and perfect justice with a physician who " imagined that 
the health of the human body could be preserved only by 
a certain precise regimen of diet and exercise." And that 
he should resort to an illustration which depended for its 
effect upon such a suppressio veri to explain or emphasize 
his dissent from a man whom he esteemed so highly as 
Quesnay, shows a latent uncertainty. Both in quality and 
in temper of mind, Smith seems the last of men to use such 
an argument except in despair of finding a better one. 

There are passages in the " Wealth of Nations " where 
Adam Smith checks his inquuy with a suddenness that 
shows an indisposition to venture on ground that the pos- 
sessing classes would deem dangerous. But in nothing he 
left after him (just before his death he destroyed all manu- 
scripts he did not wish published), is there an indication 
that he was more than puzzled by the attempt of the 
Phj^siocrats to explain the great truth that they saw with 
wrong apprehension. He clearly perceived that " the prod- 
uce of labor constitutes the natural recompense or wages 
of labor," and that it was the appropriation of land that 
had deprived the laborer of his natural due. But he had 
evidently never looked further into the phenomena of rent 
than to see that " the landlords, like all other men, love to 
reap where they never sowed." He passes over the great 
subject of the relations of men to the land they inhabit, 
as though the appropriation by a few of what nature has 
provided as the dwelling-place and storehouse of all must 
now be accepted as if it were a part of the natural order. 
And so, indeed, in his times and conditions it must have 
appeared to him. 

Even if Adam Smith had seen the place of the single 
tax in the natural order, as the natural means for the 
supply of the natural needs of civilized societies, prudence 



168 THE NATUEE OF WEALTH. Booh II. 

might well have suggested that his inquiry should not be 
carried so far. I mean, not merely that prudence of the 
individual which impelled Copernicus to withhold until 
after his death any publication of his discovery of the 
movement of the earth about the sun ; but that prudence 
of the philosopher which, from a desire to do the utmost 
that he can for Truth and Justice in his own time, may 
prevent him from advancing a larger measure of truth 
than his own time can receive. 

In that part of the eighteenth century when the Physio- 
crats dreamed that they were on the verge of carrying 
their great reform and Smith wrote painfully his " Wealth 
of Nations," there was a wide difference between the con- 
ditions of France and Scotland. 

Sheltered under the friendship of a king whose dynasty 
had reduced the great feudal landlords to servitors and 
courtiers; seeking with the aphorism, ''Poor peasants, 
poor kingdom ; poor kingdom, poor king," to arouse the 
strongest power in the state to the relief of the most 
downtrodden ; cherishing the hope that the emancipation 
of man might be accomplished by the short and royal road 
of winning the mind and conscience of a young and ami- 
able sovereign, the French philosophers might have some 
prospect of getting a hearing in their advocacj^ of the 
single tax. But, on the other side of the Channel, the 
"landed interest," gorged with the spoil of Church and 
Crown and peasants and clansmen, reigned supreme. For 
a solitary man of letters to have attacked this supreme 
power in front would have been foolishness. 

That Adam Smith, '' all-round man " that he was, pos- 
sessed both the prudence of the man and the prudence of 
the philosopher, is shown by the fact that he managed to 
do what he did, without arousing in greater degree the ire 
of the defenders of vested wi-ongs. Whoever will intelli- 
gently read the " Wealth of Nations " will find it full of 



Chajp.V. SMITH AND THE PHYSIOCRATS. 169 

radical sentiment, an arsenal from which lovers of liberty 
and justice may still draw weapons for victories remaining 
to be won. Yet its author was a college professor, travel- 
ing tutor of a duke, held a lucrative government position 
and died Lord Rector of Glasgow University. 

For the present times at least, the Scotsman succeeded 
where the Frenchman failed. It is he, not Quesnay, who 
has come down to us as the "father of political economy." 

This position is recognized even by economists who differ 
from what they deem his school. Thus Professor James, 
of the University of Pennsylvania, himself belonging to 
the "new school," says of Adam Smith in the article 
".Political Economy " in Lalor's Cyclopedia, 1884 : 

All theories and development of the preceding ages culminate in 
him, all lines of development in the succeeding ages start from him. 
His work has been before the public over one hundred years, and yet 
no second book has been produced that deserves to be compared with 
it in originality and importance. The subsequent history of the 
science is mainly the history of attempts to broaden and deepen the 
foundation laid by Adam Smith, to build the superstructure higher 
and render it more solid. 

It is for this reason that I take Adam Smith's " Wealth 
of Nations" as the great landmark in the history of 
Political Economy. > 



CHAPTER VI. 
SMITH'S INFLUENCE ON POLITICAL ECONOMY. 

SHOWING WHAT THE " WEALTH OF NATIONS " ACCOMPLISHED 
AND THE COURSE OF THE SUBSEQUENT DEVELOPMENT OF 
POLITICAL ECONOMY. 

Smith, a philosopher, who addressed the eultm'ed, and whose attack 
on mercantilism rather found favor with the powerful landowners 
—Not entirely exempt from suspicion of radicalism, yet pardoned 
for his aflEQiation with the Physiocrats— Efforts of Malthus and 
Ricardo on respeetabiUzing the science— The fight against the 
corn-laws revealed the true beneficiaries of protection, but passed 
for a free-trade victory, and much strengthened the incoherent 
science — Confidence of its scholastic advocates — Say's belief in 
the result of the colleges taking up political economy — Torrens's 
confidence — Failui'e of other countries to follow England's ex- 
ample— Cairnes doubts the effect of making it a scholastic study 
—His sagacity proved by the subsequent breakdown of Smith's 
economy— The true reason. 

A DAM SMITH was not a propagandist or a politician, 
J\. as were the Physiocrats. He was simply a philoso- 
pher, addressing primarily a smaU, comfortable and enl- 
tiired class, whose sympathies and feelings were identified 
with the existing social order, and he wielded a power 
which requii'es the fruition of time and the opening of 
opportunity for its culmination in action— a power which 
men of affairs are in its first beginnings apt to underrate. 

When the first few copies of my "Progress and Pov- 
erty " were printed in an author's edition in San Francisco, 

170 



Chajh VL ADAM SMITH'S INFLUENCE. I7I 

a large landowner (the late General Beale, proprietor of 
the Tejon Ranch, and afterwards United States Minister to 
Austria), sought me to express the pleasure with which he 
had read it as an intellectual performance. This, he said, 
he had felt at liberty to enjoy, for to speak with the free- 
dom of philosophic frankness, he was certain my work 
would never be heard of by those whom I wished it to 
affect. 

In the same way, but to a much greater degree, the 
small class whom alone the "Wealth of Nations" could 
first reach were able to enjoy its greatness as an intellec- 
tual performance that widened the circle of thought. Few 
of them were disturbed by any fear of its ultimate effect 
on special interests. At that time a popular press was 
not yet in existence, and books of this kind were addressed 
only to the "superior orders." The House of Commons, 
the nominal representative of the unprivileged in Great 
Britain, was filled by the appointees of the great land- 
owners ; and the oligarchy that ruled in the British Islands 
was really stronger than the similar class under the abso- 
lute monarchy of France. It was only a few years before 
the publication of the " Wealth of Nations " that the land- 
lord's right of pit and gallows, i.e., of life and death, had 
been abolished in Scotland, not as a matter of justice, but 
by purchase, as a matter of dynastic expediency ; and work- 
men in coal-pits and salt-works were still virtually slaves, 
being formally denied the right of hcibeas corpus. 

Adam Smith had avoided arousing antagonism from the 
landed interests. And in turning the aggressive side of 
the new science against the mercantile system, as he styled 
what has since been known as the protective system, he 
found favor with, rather than excited prejudice among, 
the cultured class— the only class to which such a book as 
his could at that time be addressed. Such a class, under 
the conditions then existing in Great Britain, is apt to feel 



172 THE NATURE OF WEALTH. Book II. 

contempt tinged with anger for traders beginning to aspire 
towards sharing the power and place of " born masters of 
the soil." Thus the indignation with which he speaks of 
how " the sneaking arts of underhng tradesmen are erected 
into political maxims for the conduct of a great empire," 
and with which he compares " the capricious ambition of 
kings and ministers"— ''the violence and injustice of the 
rulers of mankind, for which, perhaps, the nature of human 
affairs can scarce afford a remedy," with " the impertinent 
jealousy, the mean rapacity, the monopolizing spirit of 
merchants and manufacturers who neither are nor ought 
to be the rulers of mankind," could not fail to strike a 
sympathetic chord in the spirit then intellectually as 
pohtically dominant in Great Britain. This would render 
unnoticed the quiet way in which he shows that " superi- 
ority pf birth " is but " an ancient superiority of fortune " * 
and attributes the difference between the philosopher and 
the street porter to the difference in the accidents under 
which they have been placed. 

Yet with the outbreak of the French Revolution the 
radicalism of the " Wealth of Nations " did not pass en- 
tirely unnoticed. A note appended by Dugald Stewart, in 
1810, to the second edition of the biography of Adam 
Smith, first read before the Eoyal Society of Edinburgh 
in 1793, explains as a reason why he had in the first edi- 
tion confined himself to a much more general view of the 
" Wealth of Nations " than he had once intended, that : 

The doctrine of a free trade was itself represented as of a revolu- 
tionary tendency ; and some who had formerly prided themselves on 
an intimacy with Mr. Smith, and on their zeal for the propagation 
of his liberal system, began to call in question the expediency of 
subjecting to the disputations of philosophers the arcana of state 
policy and the unfathomable wisdom of the feudal ages. 

* "Wealth of Nations," Book V., Chapter II., Part II. 



Cha2}, VI. ADAM SMITH'S INFLUENCE. 173 

And William Playfair, in his annotated edition of the 
''Wealth of Nations" (London, 1805), deems it necessary 
to apologize for Smith's sympathy with the Physiocrats by 
declaring that " the real fact is that Dr. Smith, as well as 
ma.ny of the Economists themselves, was ignorant Of the 
secret belonging to the sect"— that " simply pretending to 
reduce to practice the Economical Table, they were silently 
laboring to overturn the thrones of Europe." This igno- 
rance, since it was shared at the same time by " a monarch 
of such eminent abilities and penetration" as the great 
Frederick of Prussia, Playfair thinks may be well par- 
doned to Dr. Smith. And pardoned it was. Or rather 
the objections made to Dr. Smith on the score of radicalism 
attracted so little attention that it is only by delving in 
forgotten literature that any trace of them can be found. 
The larger fact is that Adam Smith, opening the study of 
political economy at a lower level than the Physiocrats, 
found less resistance, and his book began to secure so per- 
manent a recognition for the new science that its continu- 
ance to our time is properly traced to him as its founder 
rather than to them. 

In 1798, five years after Stewart read his biography of 
Smith before the Royal Society of Edinburgh, and eight 
years after the author of the " Wealth of Nations," lament- 
ing with his last breath that he had done so little, was laid 
to rest in the Edinburgh Cannongate, the English clergy- 
man Malthus brought forward his famous theory of popu- 
lation. This at once, like " a long-felt want," took its place 
in the crystallizing system of political economy which 
Smith had brought into shape, and which, if it was lacking 
in a clear and consistent definition of wealth, was not on 
that account objectionable to the spirit of the learned in- 
stitutions which soon began to make its teaching a func- 
tion of their official faculties. A few years after Malthus 
came Ricardo, to correct mistakes into which Smith had 



174 THE NATURE OF WEALTH. Book II. 

fallen as to the nature and cause of rent, and to formulate 
the true law of rent ; but to do this by laying stress on the 
fact that rent would increase as the necessities of increas- 
ing population forced cultivation to less and less produc- 
tive land, or to less and less productive points on the same 
land. 

Thus, the theory of wages into which Adam Smith fell 
when, as though fearful of the radical conclusions to which 
it must lead, he suddenly abandons his true perception 
that " the produce of labor constitutes the natural recom- 
pense or wages of labor," to consider the master as provid- 
ing from his capital the wages of his workmen, together 
with the theory of the tendency of population to increase 
faster than subsistence, and the apprehension of the 
theory of rent as resulting from the forcing of exertion to 
less and less productive land, with what was deemed its 
corollary, '■'■ the law of diminishing productiveness in agri- 
culture," became cardinal doctrine. These linking with 
and buttressing each other, in what soon became the ac- 
cepted system of political economy as developed from the 
'' Wealth of Nations," did away effectually with any fear 
that the study of natural laws of the production and dis- 
tribution of wealth might be dangerous to the great House 
of Have, For in this way political economy was made to 
serve the purpose of an assumed scientific demonstration 
that the shocking contrasts in the material conditions of 
men which our advancing civilization presents, result not 
from the injustice and mistakes of human law, but from 
the immutable law of Nature— the decrees of the All-origi- 
nating, All-maintaining Spirit. 

So far from showing any menace to the great special 
interests, a political economy, so perverted, soon took its 
place with a similarly perverted Christianity to soothe the 
conscience of the rich and to frown down discontent on 
the part of the poor. In text-books and teachings from 



Chap. VI. ADAM SMITH'S INFLUENCE. 175 

which Adam Smith's recurring perceptions of the natural 
equality of men were eliminated, it became indeed "the 
dismal science." It was held by its admirers that it needed 
only to be sufficiently taught them to convince even the 
''lower orders," that things as they are are things as they 
Ought to be, except perhaps that "the monopolizing spirit 
of merchants and manufacturers," and " the sneaking arts 
of underling tradesmen" should no longer be permitted 
to be erected into maxims for governmental interferences 
with trade. 

Thus as the system of political economy presented by 
Adam Smith began to attract the attention of the thought- 
ful and cultured, it did not meet the resistance it would 
have encountered had the special interests which it threat- 
ened been really those of the growing class of merchants 
and manufacturers. On the other hand, the apparent 
turning of its aggressive side against merchants and manu- 
facturers prevented the powerful landed interest from 
perceiving fully its relation to their own monopoly until 
it had gained the weight of recognized philosophic au- 
thority. 

Now the course of social development in the civilized 
world generally, but particularly in Great Britain, in the 
era of steam which immediately followed Adam Smith, 
was enormously to increase the relative social weight of 
the mercantile and manufacturing classes. But when, 
fifty years after the death of Adam Smith, what he called 
the mercantile system came into political issue in the 
agitation for the repeal of the corn-laws, it was not among 
merchants and manufacturers, but in the power of the 
landed interest, that the strong defense of this system 
was seen to lie. The repeal of the corn-laws was carried 
against the strenuous resistance of the landowners by a 
combination of merchants and manufactiu'ers with the 
working-classes, urged by bitter discontent and growing 



176 THE NATURE OF WEALTH. Book II. 

aspirations. But it was not carried until it became evident 
to the more thoughtful that if the agitation went on it 
would be sure to lead to an inquiry into the right by which 
a few individuals called landowners, claimed the land of 
the British Islands as their property. 

The truth is that merchants and manufacturers, as 
merchants and manufacturers, are not the ultimate bene- 
ficiaries of the protective system, and that mercantile 
interests can long profit by it only when sheltered behind 
some special monopoly. This has been shown in the 
United States, where the owners of coal and mineral and 
timber and sugar land have constituted the backbone 
of the political strength that has carried protection to such 
monstrous length. 

The repeal of the English corn-laws passed in Great 
Britain for a victory of free trade as far as it was practicable 
to carry free trade. And in scholastic circles in that coun- 
try and in the United States, and throughout the civihzed 
world that took its intellectual impulse from England, it 
greatly increased the hopefulness of the professed econo- 
mists. 

Thus strengthened by this powerful impulse, there con- 
tinued to grow up under the sanction and development of 
a series of able and authoritatively placed men, whose 
efforts were devoted to smoothing away difficulties and 
covering up incongruities, an accredited system of political 
economy which found its most widely accepted expounder 
in John Stuart Mill, and reached perhaps its highest point 
of authority in scholastic circles about or shortly after the 
centennial of the publication of the "Wealth of Nations." 
Yet it was as wanting in coherence as the image that 
Nebuchadnezzar saw in his dream. It contained much 
real truth well worked out. But this was conjoined with 
fallacies which could not stand examination. The attempt 
to define its object-noun, wealth, and the sub-term of 



Chap. FT. ADAM SMITH'S INFLUENCE. 177 

wealth, capital, made them much more indefinite and 
confused than they had been left by Adam Smith. And 
it was never attempted to bring together what were given 
as the laws of the distribution of wealth, as that would 
have shown at a glance their want of relation. 

This political economy had no real hold on common 
thought, and was regarded even by ordinarily inteUigeut 
men as a scholastic or esoteric science. But it was spoken 
of by its professors with the utmost confidence as an 
assured science, and their belief in its success was greatly 
increased. 

From the beginning until well past the middle of the 
nineteenth century the temper of the recognized expound- 
ers of the political economy which took shape from Adam 
Smith's foundation was hopeful and confident. They 
believed they had hold of a true science, which needed 
only development to be imiversally recognized. 

In what was printed as the introduction to the first 
American edition of Jean Baptiste Say's treatise on polit- 
ical economy*— which being translated into English and 
widely circulated on both sides of the Atlantic became for 
a long time, in the United States at least, perhaps the most 
popular of the expositions of the science that Adam Smith 
had founded— Say points out certain difficulties that polit- 
ical economy must have to encounter : " that opinions in 
political economy are not only maintained by vanity, but 
by the self-interest enlisted in the maintenance of a vicious 
order of things ; " that " writers are found who possess the 
lamentable faculty of composing articles for journals, 
pamphlets and even whole volumes upon subjects which, 
according to their own confession, they do not under- 
stand ; " and that " such is the indifference of the public 

* The original work was published in 1803. But this introduction 
bears internal evidence of having been written not earlier than 1814. 



178 THE NATURE OP WEALTH. Book II. 

that they rather prefer trusting to assertions than be at the 
trouble of investigating them." 
But he continues : 

Everything, however, announces that this beautiful, and above 
all, useful science, is spreading itself with increasing rapidity. Since 
it has been perceived that it does not rest upon hypothesis, but is 
foimded upon observation and experience, its importance has been 
felt. It is now taught wherever knowledge is cherished. In the 
universities of Germany, of Scotland, of Spain, of Italy, and of the 
north of Europe, professorships of political economy are already es- 
tablished. Hereafter this science will be taught in them, with all the 
advantages of a regular and systematic study. Whilst the Univer- 
sity of Oxford proceeds in her old and beaten track, within a few 
years that of Cambridge has established a chair for the purpose of 
imparting instruction in this new science. Courses of lectures are 
delivered in Geneva and various other places ; and the merchants of 
Barcelona have, at their own expense, founded a professorship on 
political economy. It is now considered as forming an essential part 
of the education of princes ; and those who are called to that high 
distinction ought to blush at being ignorant of its principles. The 
Emperor of Russia has desired his brothers, the Grand Dukes Nicho- 
las and Michael, to pursue a course of study on this subject under 
the direction of M. Storch. Finally, the Government of France has 
done itself lasting honor by establishing in this kingdom, under the 
sanction of public authority, the first professorship of political 
economy. 

This hopefulness as to what was to be accomplished 
by the regular and systematic study of political economy 
pervaded for a long time all economic writings. Even 
when it was necessary to admit that the unanimity that 
had been confidently expected had not come, it was always 
just about to come. 

Thus Colonel Torrens, in the introduction to his " Essay 
on the Production of Wealth," says in 1821 : 

In the progress of the human mind, a period of controversy among 
the cultivators of any branch of science must necessarily precede the 
period of unanimity. With respect to political economy, the period 



Chap. ri. ADAM SMITH'S INFLUENCE. 179 

of controversy is passing away, and that of unanimity rapidly ap- 
proaching. Twenty years hence there wiU scarcely exist a doubt 
respecting any of its fundamental principles. 

With the great defeat of protection in 1846, the confi- 
dence of political economists became even greater than 
before. But the predictions that the example of Great 
Britain in abolishing protective duties would be quickly 
followed throughout the civilized world— predictions based 
on the assumption that this partial victory for freedom 
had been won by the advance of an intelligent pohtical 
economy, were not realized; and fostered by such tre- 
mendous pohtical events as the great fight between the 
American States and the Franco-German war, a wave of 
reaction in favor of protection seemed to sweep over pretty 
nearly all the civilized world outside of Great Britain. 

And while in the scholastic world, of the English-speak- 
ing countries at least, the triumph of Adam Smith's oppo- 
sition to the principles of the mercantile system seemed to 
have established firmly an accepted science of pohtical 
economy, and chairs for its teaching formed an indispensa- 
ble adjunct of every institution of education, the real inco- 
herencies which had been slurred over began more and 
more to show themselves. 

In 1856 Professor J. E. Cairnes, dehvering in DubKn 
University on the Whately Foundation a series of lectures 
afterwards reprinted under the title of ''The Character 
and Logical Method of Political Economy," quoted what he 
called the unlucky prophecy of Torrens, made in 1821, that 
the period of controversy had passed and that of unanimity 
was rapidly approaching, and that in twenty years from 
then there would scarcely exist a doubt respecting any of 
th e fundamental principles of political economy. Professor 
Cairnes did this only to give point to a statement that fun- 
damental questions "are still vehemently debated, not 
merely by sciolists and smatterers, who may always be 



180 THE NATURE OF "WEALTH. Booh 11. 

expected to wrangle, but by the professed cultivators and 
recognized expounders of the science," and that : 

So far from the period of controversy having passed, it seems 
hardly yet to have begun— controversy, I mean, not merely respect- 
ing propositions of secondary importance, or the practical application 
of scientific doctrines (for such controversy is only an evidence of the 
vitality of a science, and is a necessary condition of its progress), but 
controversy respecting fundamental principles which lie at the root 
of its reasonings, and which were regarded as settled when Colonel 
Torrens wrote. 

Cairnes continues with a passage, which as showing a 
perception by a leading professor of political economy 
of the effect of the establishment of professorships, from 
which Say a generation before had hoped so much and 
from which up to this very time so much continued as it 
still continues to be hoped by those who know no better, 
is worth my quoting : 

When Political Economy had nothing to recommend it to public 
notice but its own proper and intrinsic evidence, no man professed 
himself a political economist who had not conscientiously studied 
and mastered its elementary principles ; and no one who acknowledged 
himself a political economist discussed an economic problem without 
constant reference to the recognized axioms of the science. But 
when the immense success of free trade gave experimental proof of 
the justice of those principles on which economists relied, an obser- 
vable change took place both in the mode of conducting economic 
discussions and in the class of persons who attached themselves to 
the cause of political economy. Many now enrolled themselves as 
political economists who had never taken the trouble to study the 
elementary principles of the science ; and some, perhaps, ', whose 
capacities did not enable them to appreciate its evidence ; while even 
those who had mastered its doctrines, in their anxiety to propitiate 
a popular audience, were too often led to abandon the true grounds 
of the science, in order to find for it in the facts and results of free 
trade a more popular and striking vindication. It was as if mathe- 
maticians, in order to attract new adherents to their ranks, had con- 
sented to abandon the method of analysis, and to rest the truth of 
their formulas on the correspondence of the almanacs with astro- 



Chap. VL ADAM SMITH'S INFLUENCE. 181 

nomieal events. The severe and logical style which characterized the 
cultivators of the science in the early part of the century has thus 
been changed to suit the different character of the audience to whom 
economists now addressed themselves. The discussions of Political 
Economy have been constantly assuming more of a statistical char- 
acter ; results are now appealed to instead of principles ; the rules of 
arithmetic are superseding the canons of inductive reasoning ; till the 
true course of investigation has been well-nigh forgotten, and Politi- 
cal Economy seems in danger of realizing the fate of Atalanta. 

At the present time it is clearly to be seen that the worst 
fears of Cairnes have been more than realized. The period 
of controversy instead of having passed, had indeed, it has 
since been proved, hardly then begun. The accelerating 
tendency since his time as in the period of which he then 
spoke, has been away from, not towards, uniformity ; con- 
troversy has become incoherence, and what he then thought 
to be the science of political economy has been destroyed 
at the hands of its own professors. 

But while Cairnes realized the true drift of a tendency 
that most of his contemporaries did not understand, and saw 
the real effect of a study of political economy for the pur- 
pose of filling professorships and writing books, he did not 
see the real cause which so much faster and farther than he 
could have imagined has given sober reality to his more 
than half-rhetorical prediction. The reason of the con- 
stantly increasing confusion of the scholastic political econ- 
omy has lain in the failure of the so-called science to define 
its subject-matter or object-noun. Statistics cannot aid us 
in the search for a thing until we know what it is we want to 
find. It is the Tower of Babel over again. Men who at- 
tempt to develop a science of the production and distribu- 
tion of wealth without first deciding what they mean by 
wealth cannot understand each other or even understand 
themselves. 



CHAPTER VIL 

INEFFECTUAL GROPINGS TOWARD A DETER- 
MINATION OF WEALTH. 

SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY 
BEFORE ''progress AND POVERTY." 

niogieal character of the "Wealth of Nations"— Statements of nat- 
ural right— Spence, Ogilvie, Chalmers, Wakefield, Spencer, Dove, 
Bisset— Vague recognitions of natural right— Protection gave rise 
to no political economy in England, but did elsewhere — Germany 
and protectionist political economy in the United States— Diver- 
gence of the schools— Trade-unionism in socialism. 

THE " Wealtli of Nations " won great vogue by its strik- 
ing qualities and its prudence in avoiding antagonism 
with landowners. It made a nucleus around whicli the 
scholastic classes could rally, assuming that they were 
teaching a science of political economy, without seriously 
hurting any powerful interest. What Smith had done 
was after all an evasion— a settlement which left the 
cardinal principles unsettled. He had shown how greatly 
the division of labor increases the productiveness of labor, 
and without daring to go too far had shown that to leave 
labor unrestricted would increase the annual product. He 
had in short turned the aggressive side of the science 
against the protective, or, as he styled it, the mercantile 
system, thus putting on its feet a political economy which 
taught a sort of free trade that did not seriously object to 

182 



Chap.VII. INEFFECTUAL GROPINGS. 183 

taxes on labor and the products of labor for raising the 
revenues of government. 

What wealth, or its sub-term, capital, was, Smith did 
not really say, nor yet did he make clear the division of 
their joint produce between the human factor and the 
natural factor, nor venture to show what was the cause 
and warrant of poverty. In political economy as he left 
it there were no axioms— nothing that would correlate and 
hold together. But such was his genius and prudence, and 
his adaptability to the temper of his time, that he got a 
hearing where more daring thinkers failed, and a science 
of political economy began to grow on his foundations. 
Malthus by giving a scientific semblance to a delusion 
which tallied with popular impressions, and Ricardo by 
giving form to a scientific interpretation of rent, soon 
provided what passed for axioms, one of which was wrong, 
and the other of which was wrongly or at least inade- 
quately stated. While between them, all was left at sea. 

Yet such was the feeling that there ought to be a polit- 
ical economy, and so agreeable to the ruling class was 
what was offered as such, that chairs for the study of it 
began to multiply. They were of course filled by men 
who taught what they had learned, with the constant pres- 
sure on them of the class dominant in all colleges— a class 
which, whatever be the faults of a political economy, are 
disposed to accept things as they are as the best order of 
things possible, and to view with intense opposition any 
radical change that would provoke real discussion. And 
as nearly every professor of political economy thought it 
incumbent on him to write a text-book, or at least to do 
something to show a reason for his existence, there was 
much going over old ground and picking out of small 
differences, but no questioning of anything that could 
arouse vital debate. And given a state of society in which 
the many were poor and the few were rich, any attempt to 



184 THE NATUEE OF WEALTH. Bool: II. 

point out a true political economy, if it got attention, 
would inevitably arouse much debate. 

Thus in fact political economy, as it found teachers and 
professors and the standing of a science, was to the class 
who had appropriated land as belonging to them exclu- 
sively a very comfortable doctrine. It applied the doctrine 
of '' letting things alone," without any suggestion of the 
question of how things came to be. It was, as it was 
styled by Clement C. Biddle, the American translator of 
Say, "the liberal doctrine that the most active, general 
and profitable employments are given to the industry and 
commerce of every people by allowing to their direction 
and application the most perfect freedom compatible with 
the security of property P As to what constitutes property 
there was no dispute. And if one did not look too closely, 
and beyond the usages of the times, in the more advanced 
European nations there could be no dispute. Property? 
Why property was of course v/hat was susceptible of 
ownership. Any fool would know that ! 

Nor after the surrender of the Peel ministry, in time to 
prevent it, was any question of the sanction of property 
raised. English slavery had disappeared in its last forms 
before the nineteenth century began, and though the 
question of the ownership of slaves in the tropical colonies, 
and finally in the Southern United States, was likely if 
continuously debated to bring up the larger question, this 
did not appeal to the feelings of the people. So it was 
settled for the time, as to the colonies by the device of 
buying off the slave-owners at public expense ; and in the 
United States by the arbitrament of war. 

The question of the validity of property was never reaUy 
raised in England until after the publication of " Progress 
and Poverty" began to call it up. But the attention 
which that has aroused has since brought to light some 
definite utterances, which show, as I take it, that the 



Clmjy.VII. INEFFECTUAL GROPINGS. 185 

doctriues of the Freucli Physiocrats would have found 
hospitable reception in Great Britain had it been possible 
at the time to have really made them known. 

Thus H. M. Hyndman has dug up from the British 
Museum a lectui-e by Thomas Spence, delivered before 
the Philosophical Society of Newcastle, on November 8, 
1775, a year prior to the pubhcation of the " Wealth of 
Nations," and for which the Society, as Spence puts it, did 
him "the honor" to expel him. In this lecture Spence 
declares that all men "have as equal and just a property 
in land as they have in hberty, air, or the light and heat 
of the sun," and he proposes what now would be again 
called "the single tax"— that the value of land should be 
taken for all public expenses, and all other taxes of what- 
ever kind and nature should be abolished. He draws a 
glowing picture of what humanity would be if this simple 
but most radical reform were adopted. But so much 
against the wishes of all that had authority was he, that 
his proposal was utterly forgotten until dug out of its 
burial-place more than a century after. 

So, in 1889, D. C. Maedonald, a single-tax man, and a 
solicitor of Aberdeen, dug out of the Advocates' Library 
of Edinburgh, and the British Museum, in London, copies 
of a book printed in 1782 by William Ogilvie, Professor 
of Humanities in King's College, Aberdeen, entitled " An 
Essay on the Right of Property in Land, with Respect to 
its Foundation in the Law of Nature, its Present Estab- 
lishment by the Municipal Laws of Europe, and the Regu- 
lations by which it might be Rendered More Beneficial to 
the Lower Ranks of Mankind." Professor Ogilvie, though 
he makes no reference to any other authority than that of 
Moses, had evidently some knowledge of the Physiocrats, 
and most unquestionably declares that land is a hirtlirujlit 
tvMch every citizen still retains. He advocates the taxation 
of land, with the entire abolition of all other taxes, though, 



186 THE NATURE OP WEALTH. Book IL 

as if despairing of so radical a reform, lie proposes some 
palliatives such as allotments to actual settlers, leases, etc. 
He doubtless saw the utter hopelessness of making the 
fight under existing conditions, for it seems probable that 
his book was never published, only a few copies being 
printed for private circulation by the author. 

Among the scholastically accepted writers in the first 
thirty years of the century are two who seem to have some 
glimmerings of the truth perceived by the Physiocrats, of 
the relations between land and labor, though in a cmi- 
ously distorted way. Dr. Chalmers, who was a divinity 
professor in the University of Edinbui'gh, and a strong 
Malthusian, contended that the owners of land ultimately 
paid all taxes levied on labor, and contended that titles 
(which he regarded as so much retained by the state for 
beneficial purposes) should be maintained. All others he 
would have ultimately abolished, and the revenues of the 
state ultimately raised from the value of land. This, he 
thought, would be simpler and better, and avoid much 
dispute, ''relieving government from the odium of taxes 
which so endanger the cause of order and authority." He 
was a stanch supporter of primogeniture, opposed to any- 
thing which aimed at the division of the land, and would 
have the country enjoy the spectacle of a noble and splen- 
did aristocracy, of which the younger branches should be 
supported by places of at least £1000 a year in the public 
services. And, while he would have the landlords pay all 
taxes, he thought it ''wholesome and befitting that they 
should have the political ascendancy also." For "the 
lords of the soil, we repeat, are naturally and properly the 
lords of the ascendant." Chalmers was a good example of 
the toadying spirit of so many of the Scottish ministers. 
He afterward joined in the disruption of the Kiil^ by the 
Free Kirk movement. Yet, in spite of his obsequience, 
he did not succeed in popularizing the single tax with the 



Chap. VII. INEFFECTUAL GROPINGS. 187 

British aristocracy, who fought the repeal of the corn-laws 
as long as they could. He passed as an economist almost 
into oblivion. 

Another curious example of the perversion of the doc- 
trine of the relation between land and labor was given by 
Edward Gribbou Wakefield, who visited this country in its 
more democratic days in the first quarter of the century, 
ere the natural result of our thoughtless acceptance of 
land and true property as alike wealth, and our desire to 
get in the first place an owner for land had begun to show 
so fully its effects. He was impressed with the difference 
between the society growing up here and that to which he 
had been used, and viewing everything from the stand- 
point of those accustomed to look on the rest of mankind 
as created for their benefit, he deemed the great social and 
economic disadvantage of the United States to be ''the 
scarcity of labor." To this he traces the rudeness of the 
upper class — its want of those refinements, enjoyments 
and delicacies of life, common to the aristocracy of Eng- 
land. How could an English gentleman emigi-ate to a 
country where he might actually have to black his own 
boots, and where no one could count on a constant supply 
of labor ready to accept as a boon any opportunity to per- 
form the most menial and degrading service ? He saw, as 
Adam Smith before him saw, that this " scarcity of labor" 
came from the cheapness of land where the vast area of 
the public domain was open for settlement at nominal prices. 
Without the slightest question that the land was made for 
landlords, and that laborers were intended to furnish a 
supply of labor for the upper classes, he wished the new 
countries which England had yet to settle to be socially, 
politically and economically newer Englands ; and, without 
waiting for the slower process of speculation, he wished to 
bring about in these new countries such salutary " scarcity 
of employment " as would give cheap and abundant labor 



188 THE NATUPtE OF WEALTH. Book 11. 

from the very start of settlement. He, tlierefore, proposed 
that land should not be given, but sold at the outset, at 
what he called a sufficient price— a price high enough to 
make laborers work for others until they had acquired the 
fund necessary to pay a price for what nature offered with- 
out money and without price. The money received by the 
state in this way he proposed to devote in paying the 
passage of suitable and selected immigrants. This would 
give from the start two classes of immigrants to settle the 
great waste places which England still retained, especially 
in Australia and New Zealand— the better class, who would 
pay their own expenses, and buy from the government 
their own land, which would at first have a value ; and the 
assisted class, who, being selected from .the best workers 
in the old country, would at once be able to supply all the 
required labor. Thus the nev/ country where this plan was 
adopted would from the first, while wages were still enough 
higher than in England to make working-men, especially 
if assisted, desire to go there, offer the inducement to a 
wealthy and cultivated class of a "reasonable" and ready 
supply of labor, and save them from such hardships from 
the lack of it as made the United States so unattractive to 
the "better class" of Englishmen. 

This plan was very attractive to the more wealthy and 
influential class of Englishmen concerned in, or thinking 
of, emigrating to the newer colonies, and was finally adopted 
by the corporation concerned in settling "West Australia, 
and afterwards the other Australian colonies. But even 
its obvious inferences never affected the teaching of 
political economy. 

In 1850 two works appeared in England, which, though 
neither of them was from the ranks of the scholastic econ- 
omists, were both premonitions of a coming demand for a 
political economy which would take some consideration of 
the interest of the masses. One of these was by Herbert 



Chap.riL INEFFECTUAL GROPINGS. 189 

Spencer, then young and unknown, and was entitled 
" Social Statics, or The Conditions Essential to Human 
Happiness Specified, and the First of Them Developed," 
Chapter IX. of this book, '' The Right to the Use of the 
Earth," is a telling denial of what the economists of Smith's 
school had quietly assumed could not be questioned, the 
validity of property in land. It got no attention in Eng- 
land, having been noticed in the " British Quarterly Re- 
view" only in 187G, when his sociological v/orks began first 
to be heard of. It was however reprinted in the United 
States in 1864, with a note by the author, and when, about 
1877, Appleton & Co., of New York, became the American 
publishers of his philosophical writings, they reprinted 
this with his other works, and on the strength of them it 
began to get into circulation. 

This was the only work of the kind I knew of when 
writing "Progress and Poverty;" and in ''A Perplexed 
Philosopher" (1892), I have given a full account of it, and 
of Mr. Spencer's shifting repudiation and final recantation 
of what he had said in denial of property in land. 

In the same year (1850) appeared in London "The 
Theoi-y of Human Progression and Natural Probability of 
a Reign of Justice." It was published anonymously and 
dedicated to Victor Cousin of France. The argument of 
" The Theor}^ of Human Progression " is that there is a 
probability of the reign of justice on earth, or millennium, 
foretold by Scriptural prophecy. One of his primary 
postulates is the inspiration of the Bible and the divinity 
of the founder of the Christian religion, which in his view 
is Scottish Presbyterianism, and which he treats as the true 
religion, all others being false. But, though adhering to 
the doctrine of the fall of man, who is by nature vile and 
wicked, he is an evolutionist in believing in the natural 
necessary advance of mankind by the progress of know- 
ledge, or to use his phrase, by the progress of correct ere- 



190 THE NATUEE OF WEALTH. Booh 11. 

dence in the natural order and necessary sequence of the 
sciences, to a reign of justice, in which is to grow a reign 
of benevolence. 

The elements of correct credence as he enunciates them 
(p. 94) are : 

1. The Bible. 

2. A correct view of the phenomena of material nature. 

3. A correct philosophy of the mental operations. 

The three things which he links together as respectively 
cause and effect, involving the conditions of society, are 
(p. 120) : 

Knowledge and freedom. 
Superstition and despotism. 
Infidelity and anarchy. 

And the foui* propositions which best give an idea of 
the scope of his work and the course of his thought are 
(p. 160) : 

1. On the sure word of divine prophecy we anticipate a reign of 
justice on the earth. 

2. That a reign of justice necessarily implies that every man in 
the world shall at some future time be put in possession of all his 
rights. 

3. That the history of civilized communities shows us that the 
progression of mankind in a political aspect is from a diversity of 
privileges toward an equality of rights. 

4. That one man can have a privilege only by depriving another 
man or many other men of a portion of their rights. Consequently 
that a reign of justice will consist in the destruction of every privi- 
lege, and in the restitution of every right. 

These propositions are extended to twenty-one main 
propositions and twelve sub-propositions, but they are all 
involved in the first four. The tenth sub-division of the 
twentieth proposition and the twenty-fii'st proposition as a 
whole are, however, well worth quoting as giving an idea 
of the character of the man and his thought : 



Cha2).VIL INEFFECTUAL GKOPINaS. 191 

. . . KJnowledge does necessarily produce change, as much as heat 
necessarily produces change ; and where knowledge becomes more 
and more accurate, more and more extensive, and more and more 
generally diffused, change must necessarily take place in the same 
ratio and entail with it a new order of society, and an amended con- 
dition of man upon the globe. Wherever, then, the unjust interests 
of the ruling classes are required to give way before the progress of 
knowledge and those ruling classes peremptorily refuse to allow the 
condition of society to be amended, the sword is the instrument 
which knowledge and reason may be compelled to use ; for it is not 
possible, it is not within the limits of man's choice, that the progress 
of society can be permanently arrested when the intellect of the 
masses has advanced in knowledge beyond those propositions, of 
which the present condition is only the realization. 

21. We posit, finally, that the acquisition, scientific ordination, 
and general diffusion of knowledge will necessarily obliterate error 
and superstition, and continually amend the condition of man upon 
the globe, until his ultimate condition shall be the best the circum- 
stances of the earth permit of. On this ground we take up (what 
might in other and abler hands be an argument of no small interest, 
namely) the natural probability of a millennium, based on the clas- 
sification of the sciences, on the past progress of mankind, and on 
the computed evolution of man's future progress. The outline alone 
of this argument we shall indicate, and we have no hesitation in 
believing that every one who sees it in its true light will at once see 
how the combination of knowledge and reason must regenerate the 
earth and evolve a period of universal prosiierity which the Divine 
Creator has gi-aciously promised, and whose natural probability we 
maintain to be within the calculation of the human reason. 

The book v/liicli, so far as my knowledge goes, "The 
Theory of Human Progression" most nearly resembles 
in motive, scope and conclusions is Herbert Spencer's 
" Social Statics," published in the same year, though evi- 
dently without knowledge of each other. Both seem to 
have little knowledge of and make slight reference to 
writers on political economy— Spencer referring in one 
place to Smith, Mill and Chalmers, while Dove quotes no 
authority later than Moses. Both go largely over the same 
ground, and both reach substantially the same practical 



192 THE NATUEE OP WEALTH. Booh II. 

conclusion; both assert the same grand doctrine of the 
natural rights of men, which is the essence of Jeffersonian 
democracy and the touchstone of true reform ; both de- 
clare the supremacy of a higher law than human enact- 
ments, and both believe in an evolutionary process which 
shall raise men to higher and nobler conditions. Both 
express clearly and well the fundamental postulates of the 
single tax, and both are of course absolute free traders. 
Spencer devotes more space to the land question, and more 
elaborately proves the incompatibihtj^ of private ownership 
of land with the moral law, and declares the justice and 
necessity of appropriating rent for public revenues with- 
out saying anything of the mode ; while Dove dwells at 
more length on the wickedness and stupidity of tariffs, 
excises and the other modes of raising revenues from taxes 
on the products of labor, and clearly indicates taxation as 
the method of appropriating rent for public purposes. 
But while the English agnostic might have regarded the 
Scottish Calvinist as yet in the bonds of an utterly un- 
scientific superstition, there is one respect in which the 
vigor and courage of Dove's thought shines superior to 
Spencer's. Spencer, after demonstrating the absolute in- 
validity of any possible claim to the private ownership of 
land, goes on to say that great difficulties must attend the 
resumption by mankind at large of their rights to the soil ; 
that had we to deal with the parties who originally robbed 
the human race of their heritage, we might make short 
work of the matter ; but that unfortunately most of our 
present landowners are men who have either mediately or 
immediately given for their estates equivalents of honestly 
earned vv^ealth, and that to ''justly estimate and liquidate 
the claims of such is one of the most intricate problems 
society will one day have to solve." 

But the orthodox Presbyterian utterly refuses thus to 
bend the knee to Baal in the slightest concession. While 



Chaxi.VII. INEFFECTUAL GROPINGS. 193 

he is not more clear than Spencer in demonstrating that 
landowners as landowners have no rights whatever, there 
is not one word in his book that recognizes in any way 
their claims. On the contrary, he declares that slavery is 
man-robbery, and that the £20,000,000 compensation given 
by the British Parliament to the West India planters on 
the emancipation of their slaves was an act of injustice 
and oppression to the British masses, and (p. 139) adds : 

No man in the world and no association in the world cotild ever 
have an equitable right to tax a laborer for the pm-pose of remunerat- 
ing a man-robber ; and, although the measure is now past and done 
with, we very much question whether some analogous cases will_ 
not be cleared up by the mass of the nation ere many years pass 
over the heads of Englishmen. When the question of landed 
property comes to a definite discussion there may be little thought 
of compensation. 

Yet neither in England nor in the United States, where 
an edition seems to have been published in Boston at the 
expense of Senator Sumner, did Dove get any attention, 
and I never heard of it until after the publication of 
" Progress and Poverty," when, in Ireland in 1882, I was 
presented with a copy by Charles Eason, head of the 
Dublin branch of the great news-publishing house of 
Smith & Sons. 

In 1854 appeared another book by Patrick Edward 
Dove, in which the authorship of " The Theory of Human 
Progression " was announced—" The Elements of Political 
Science, in two books : first, on Method, second, on 
Doctrine." And in 1856 appeared a third book, "The 
Logic of the Christian Faith," being a dissertation on 
skepticism, pantheism, the a priori argument, the a pos- 
teriori argument, the intuitional argument and revelation, 
also under title of the author, and with a dedication to 
Charles Sumner, Senator of the United States, who, with- 
out his knowledge, had procured a republication of Dove's 



194 THE NATUEE OF WEALTH. Booh 11. 

first book in Boston, being moved thereto doubtless by its 
vigorous words on slavery. 

In 1859 appeared in London *' The Strength of Nations," 
by Andrew Bisset, who has since (1877) published " The 
History of the Struggle for Parliamentary Government 
in England," a review of the systematic attempt of the 
families of Plantagenet, Tudor and Stuart to enslave the 
English people, which is mainly occupied with the attempt 
of Charles I., the resistance to it, and his final execution. 
" The Strength of Nations " very suggestively calls atten- 
tion to the fact that feudal tenures were conditioned on 
the payment of rent or special services to the state, and 
thus the much-lauded abolition of what was left of the 
feudal incidents by the Long Parliament was a relief of 
the landholders of the payment of what measured at 
present prices would suffice for the whole expenditure of 
England, and the saddling of it on general taxation ; and 
that from this dates the beginning of the English national 
debt. 

These books have produced very little effect upon polit- 
ical economy, and some of them have passed out of print 
without any perceptible effect at all. It is likely that there 
were others in addition to what I have mentioned, and it 
is certain that there were others that occasionally found 
their way into print which irregularly and spasmodically 
expressed some touch of the idea formulated in lines of 
the Wat Tyler rising : 

When Adam delved and Eve span, 
Who was then a gentleman? 

Some notion of the incongruity of the idea that a smaU 
fraction of mankind were intended to eat, and eat luxuri- 
ously without working, and another and far larger portion 
to have nothing but work to enable them to eat, and be 
compelled to beg as a boon the opportunity to do that, 



Chap.ril. INEFFECTUAL GEOPINGS. 195 

runs in broken flashes througli mucli of the reform litera- 
ture. But in political economy as it up to 1880 existed 
all such questioning was tabooed, and the utmost that 
could be found in any of the writers recognized by the 
schools was a timid suggestion that the future unearned 
increment of land values might sometime be recognized 
as belonging to the community, a proposition that, though 
it amounted to nothing whatever, as landlords were ready 
to sell land for what would give them any unearned 
increment not yet in sight, caused John Stuart Mill who 
had been giving some adhesion to it to be looked on 
askance by some, as an awful radical. 

The struggle for the repeal of the corn-laws in England 
did not lead to any development of a protectionist pohtieal 
economy. Books and pamphlets enough were written in 
favor of protection, but they were merely appeals to old 
habits of thought and vulgar prejudices, and the forces in 
favor of repeal carried them down. Elsewhere, however, 
it was different. On the Continent the conditions under 
which the tentative victory of free trade was won in Eng- 
land were lacking. Cut up into hostile nations, burdened 
with demands for revenue, the mercantile system got a 
practical hold that could not be broken by the half-hearted 
measures of its English opponents, and the gleam of hope 
which came with the English-French treaty negotiated be- 
tween Cobden and Napoleon III. was destroyed by the 
tremendous struggles which followed the fall of the latter. 
In Germany the outburst of national feeling which fol- 
lowed the struggles with France and the unification of 
German states gave rise to a school of German economists 
who taught a national economy, in which under various 
names, such as romantic, inductive and national, protec- 
tionism was advocated. 

When it came to making peace between England and 
the United States after the War of Independence, the 



196 THE NATUEE OP WEALTH. Booh IL 

American Commissioners were instructed to stipulate for 
a complete free trade between the two countries. They 
failed in this, owing to the prevalence of the protective 
sentiment in Great Britain at the time. "When the Arti- 
cles of Confederation gave way to the Constitution, the 
need for an independent source of revenue took the easy 
means of laying a Federal tariff upon foreign productions, 
though free trade between the States was guaranteed ; and 
the growth of selfish interests caused by and promotive of 
a constantly increasing demand for greater revenue built 
up a strong party in favor of protection, which had its 
way when the slavery question taking sectional shape put 
the States in which protectionism was dominant in control 
of the government with the secession of the South. This 
interest sought warrant in a scheme of political economy, 
and found it in drawing from the Grerman economists and 
in the widtings of Henry C. Carey of Philadelphia, whose 
theory in many respects differed from the English philos- 
ophy, noticeably in its advocacy of protection. In America 
this protectionist semblance of a political economy had its 
chief seat in the University of Pennsylvania, and the sup- 
port of a powerful party in which the ideas of Jefferson 
were opposed by those of Hamilton ; while in Great Britain 
the works of Carlyle and the course of modern study and 
development had in scholastic circles popularized the 
German. 

Among the schools, moreover, there was a divergence 
which began to assume greater proportions as the success 
of the anti-corn-laws struggle began to be shown in the 
accomplishment of all that any of its advocates dared to 
propose. This took shape in a contention as to value, which 
inclined to emphasize the fact that the admission that some 
immaterial things were conceded to be wealth destroyed 
the ability to keep m\j immaterial things having value out 
of that category, and consequently that wealth in the 



Chajy.VII. INEFFECTUAL GROPINGS. 197 

common sense was the only thing to be considered in 
political economy, which was really a science of exchanges. 
With the efforts of Jevons, Macleod and others this began 
to make way, and naturally affiliated with the historical, 
the inductive, the socialistic and other protectionist schools 
which grew from the Continental teachings. Instead of 
working for greater directness and simplicity, it really 
made of political economy an occult science, in which 
nothing was fixed, and the professors of which, claiming 
superior knowledge, could support whatever they chose to. 
During the century another form of protectionism had 
been growing up, originating in England, but gaining 
adherents everywhere. Like the others, it recognized no 
difference between land and products of labor, counting 
them all as wealth, and aimed by main strength at im- 
provement in the conditions of labor. Recognizing the 
workers as a class naturally separate from employers, it 
aimed to unite the laborers in combinations, and to invoke 
in their behalf the power of the state to impose restrictions, 
shorten hours, and in various ways to serve their interests 
at the expense of the primarily employing class. The 
German mind, learned, bureaucratic and incomprehensible, 
put this in the form of what passed for a system in Karl 
Marx's ponderous two volumes entitled " Capital," written 
in England in 1867, but published in German and not 
translated into English until after his death in 1887. 
Without distinguishing between products of nature and 
the products of man, Marx holds that there are two kinds of 
value — use value and exchange value — and that through 
some alchemy of buying and selling the capitalist who 
hires men to tiu'u material into products gets a larger 
value than he gives. Upon this economic proposition of 
Marx (it can hardly be called a theory), or others similar 
to it, political schemes with slight variations have been 
promulgated after the manner of political platforms. 



198 THE NATURE OF WEALTH. BooTcIL 

Under tlie name of socialism, a name which all sucli 
movements have now succeeded in appropria,ting, all such 
plans are embraced. We sometimes hear of "scientific 
socialism/' as something to be estabhshed, as it were, by 
proclamation, or by act of government. In this there is a 
tendency to confuse the idea of science with that of some- 
thing purely conventional or political, a scheme or pro- 
posal, not a science. For science, as previously explained, 
is concerned with natural laws, not with the proposal of 
man— with relations which always have existed and alwaj^s 
must exist. Socialism takes no account of natural laws, 
neither seeking them nor striving to be governed by them. 
It is an art or conventional scheme like any other scheme 
in politics or government, while political economy is an 
exposition of certain invariable laws of human nature. 
The proposal which socialism makes is that the collectivity 
or state shaU assume the management of aU means of 
production, including land, capital and man himself 5 do 
away with all competition, and convert mankind into two 
classes, the directors, taking their orders from government 
and acting by governmental authority, and the workers, 
for whom everything shall be provided, including the di- 
rectors themselves. It is a proposal to bring back man- 
kind to the socialism of Peru, but without reliance on 
divine will or power. Modern socialism is in fact without 
religion, and its tendency is atheistic. It is more destitute 
of any central and guiding principle than any philosophy 
I know of. Mankind is here ; how, it does not state ; and 
must proceed to make a world for itself, as disorderly as 
that which Alice in Wonderland confronted. It has no 
system of individual rights whereby it can define the ex- 
tent to which the individual is entitled to liberty or to 
which the state may go in restraining it. And so long as 
no individual has any principle of guidance it is impossible 
that society itself should have any. How such a combina- 



Chap.rn. INEFFECTUAL aROPINGS. 199 

tion could be called a science, and how it should get a fol- 
lowing, can be accounted for only by the " fatal facility of 
writing without thinking," which the learned German 
ability of studying details without any leading principle 
permits to pass, and by the number of places which such 
a bureaucratic organization would provide. However, 
through government repression and its falling in with 
trade-union notions it has made great headway in Ger- 
many, and has taken considerable hold in England. 

This was the condition of things at the beginning of the 
eighth decade of the century, when the English political 
economy, the only economy making any pretensions to a 
science, received from a newer and freer England what has 
proved a fatal blow. 



CHAPTER VIII. 

BREAKDOWN OF SCHOLASTIC POLITICAL 
ECONOMY. 

SHOWING THE REASON, THE RECEPTION, AND EFFECT ON PO- 
LITICAL ECONOMY OP ^'PROGRESS AND POVERTY." 

"Progress and Poverty"— Preference of professors to abandon the 
" science " ratlier than radically change it, brings the breakdown 
of scholastic economy— The "Encyclopedia Britannica"— The 
"Austrian school" that has succeeded the "classical." 

IN January, 1880, preceded in 1879 by an author's 
edition in San Francisco, appeared my '' Progress and 
Poverty," and it was followed later in the same year by an 
English edition and a German edition, and in 1882 by 
cheap paper editions both in England and the United 
States. The history of the book is briefly this : I reached 
California by sea in the early part of 1858, and finally 
became an editorial writer. In 1869 I went East on 
newspaper business, returning to California in the early 
summer of 1870. John Russell Young was at that time 
managing editor of the Wew Yorlc Trihime, and I wrote 
for him an article on " The Chinese on the Pacific Coast," 
a question that had begun to arouse attention there, taking 
the side popular among the working-classes of the Coast, 
in opposition to the unrestricted immigration of that 
people. Wishing to know what political economy had to 
say about the causes of wages, I went to the Philadelphia 

200 



Chap.rilL THE SCHOLASTIC BREAKDOWN. 201 

Library, looked over John Stuart Mill's " Political Econ- 
omy," and accepting his view without question, based my 
article upon it. This article attracted attention, especially 
in CaUforaia, and a copy I sent from there to John Stuart 
Mill brought a letter of commendation. 

While in the East, the contrast of luxury and want that 
I saw in New York appalled me, and I left for the West 
feeling that there must be a cause for this, and that if 
possible I would find out what it was. Turning over the 
matter in my mind amid pretty constant occupation, I at 
length found the cause in the treatment of land as prop- 
erty, and in a pamphlet which I took an interval of leisure 
to write, "Our Land and Land Policy" (San Francisco, 
1871), I stated it. Something like a thousand copies of 
this were sold ; but I saw that to command attention the 
work must be done more thoroughly, and refraining from 
any effort to press it at the East until I knew more, I 
engaged with others in starting (December, 1871) a small 
San Francisco daily paper, which occupied my attention, 
though I never forgot my main purpose, until December, 
1875, when, becoming entangled with an obligation to a 
rich man (U. S. Senator John P. Jones), whose note we 
had at his own request taken, I went out penniless. I 
then asked the Governor (Irwin), whom I had supported, 
for a place that would give me leisure to devote myself to 
thoughtful work. He gave me what was much of a sine- 
cure, and which has now been abolished— the position of 
State Inspector of Gas-meters. This, while giving, though 
irregularly, enough to hve on, afforded ample leisure. I had 
intended to devote this to my long-cherished plan ; and 
after some time spent in wiiting and speaking, with inter- 
vals of reading and study, I brought out " Progress and 
Poverty " in an author's edition, in August, 1879. 

In this book I took the same question that had perplexed 
me. Stating the world-wide problem in an introductory 



202 THE NATURE OF WEALTH. Booh II. 

chapter, I found that the explanation of it given by the 
accepted political economy was that wages are drawn from 
capital, and constantly tend to the lowest amount on which 
labor wiU consent to live and reproduce, because the 
increase in the number of laborers tends naturally to fol- 
low and overtake any increase in capital. Examining this 
doctrine in Book I., consisting of five chapters, entitled 
"Wages and Capital," I showed that it was based upon 
misconceptions, and that wages were not drawn from 
existing capital, but produced by labor. In Book II., 
" Population and Subsistence," I devoted four chapters to 
examining and disproving the Malthusian theory. Then 
in Book III., ''The Laws- of Distribution," I showed 
(in eight chapters) that what were given as laws did not 
correlate, and proceeded to show what the laws of rent, 
interest and wages really were. In Book IV. (four chapters), 
I proved that the effect of material progress was to increase 
the proportion of the product that would go to rent. In 
Book V. (two chapters), I showed this to be the primary 
cause of paroxysms of industrial depression, and of the 
persistence of poverty amid advancing wealth. In Book 
VI., "The Remedy" (two chapters), I showed the inade- 
quacy of aU remedies for industrial distress short of a 
measure for giving the community the benefit of the increase 
of rent. In Book VII. (five chapters), I examined the jus- 
tice ; in Book VIII. (four chapters), the exact relation and 
practical application of this remedy ; and in Book IX. (four 
chapters), I discussed its effect on production, on distribu- 
tion, on individuals and classes, and social organization 
and life ; while in Book X. (five chapters), I worked out 
briefly the great law of human progress, and showed the 
relation to this law of what I proposed. The conclu- 
sion (one chapter), " The Problem of Individual Life," is 
devoted to the problem that arises in the heart of the 
individual. 



Chap. VIII. THE SCHOLASTIC BREAKDOWN. 203 

This work was the most thorough and exhaustive ex- 
amination of political economy that had yet been made, 
going over in the space of less than six hundi-ed pages the 
whole subject that I deemed it necessary to explain, and 
completely recasting political economy. I could get no 
one to print the work except my old partner in San 
Francisco, WiUiam M. Hinton, who had gone into the 
printing business, and who had sufficient faith in me to 
make the plates. I sold this author's edition in San Fran- 
cisco at a good price, which almost paid for the plates, and 
sent copies to publishers in New York and London, offer- 
ing to furnish them with plates. With the heavy expense 
met, Appleton & Co., of New York, undertook its printing, 
and though I could get no English publisher at the time, 
before the year of first publication was out they got Kegan 
Paul, Trench & Co. to undertake its printing in London. In 
the meantime, before publishing this book, I had delivered 
a lecture in San Francisco which led to the formation 
of the Land Reform Union of San Francisco, the first of 
many similar movements since. 

"Progress and Poverty" has been, in short, the most 
* successful economic work ever published. Its reasoning 
has never been successfully assailed, and on three con- 
tinents it has given birth to movements whose practical 
success is only a question of time. Yet though the scho- 
lastic political economy has been broken, it has not been, 
as I at the time anticipated, by some one of its professors 
taking up what I had pointed out ; but a new and utterly 
incoherent political economy has taken its place in the 
schools. 

Among the adherents of the scholastic economy, who 
had been claiming it as a science, there had been from the 
time of Smith no attempt to determine what wealth was ; 
no attempt to say what constituted propert}', and no at- 
tempt to make the laws of production or distribution cor- 



204 THE NATURE OP WEALTH. Book IL 

relate and agree, until there thus burst on them from a 
fresh man, without either the education or the sanction of 
the schools, on the remotest verge of civilization, a recon- 
struction of the science, that began to make its way and 
command attention. What were their training and labo- 
rious study worth if it could be thus ignored, and if one 
who had never seen the inside of a college, except when 
he had attempted to teach professors the fundamentals of 
their science, whose education was of the mere common- 
school branches, whose alma mater had been the forecastle 
and the printing-office, should be admitted to prove the 
inconsistency of what they had been teaching as a science ? 
It was not to be thought of. And so while a few of these 
professional economists, driven to say something about 
"Progress and Povertj^," resorted to misrepresentation, 
the majority preferred to rely upon their official x)ositions 
in which they were secure b}^ the interests of the dominant 
class, and to treat as beneath contempt a book circulating 
by thousands in the three great English-speaking countries 
and translated into all the important modern languages. 
Thus the professors of political economy seemingly re- 
jected the simple teachings of ''Progress and Poverty," 
refrained from meeting with disproof or argument what it 
had laid down, and treated it with contemptuous silence. 
Had these teachers of the schools frankly admitted the 
changes called for by " Progress and Poverty," something 
of the structure on which they built might have been re- 
tained. But that was not in human nature. It would 
not have been merely to accept a new man without the 
training of the schools, but to admit that the true science 
was open to any one to pursue, and could be successfully 
continued only on the basis of equal rights and pri\dleges. 
It would not merely have made useless so much of the 
knowledge that they had laboriously attained, and was 
their title to distinction and honor, but would have con- 



Chap. nil. THE SCHOLASTIC BEEAKDOWN. 205 

verted them and their science into opponents of the tre- 
mendous pecuniary interests that were vitally concerned 
in supporting the justification of the unjust arrangements 
which gave them power. The change in credence that this 
would have involved would have been the most revolu- 
tionary that had ever been made, involving a far-reaching 
change in all the adjustments of society such as had hardly 
before been thought of, and never before been accom- 
plished at one stroke ; for the abolition of chattel slavery 
was as nothing in its effects as compared with the far- 
reaching character of the abolition of private ownership 
of land. Thus the professors of pohtical economy, having 
the sanction and support of the schools, preferred, and 
naturally preferred, to unite their differences, by giving 
up what had before been insisted on as essential, and to 
teach what was an incomprehensible jargon to the ordinary 
man, under the assumption of teaching an occult science, 
which required a great study of what had been wi-itten by 
numerous learned professors all over the world, and a 
knowledge of foreign languages. So the scholastic polit- 
ical economy, as it had been taught, utterly broke down, 
and, as taught in the schools, tended to protectionism 
and the German, and to the assumption that it was a 
recondite science on which no one not having the indorse- 
ment of the colleges was competent to speak, and on which 
only a man of great reading and learning could express an 
opinion. 

The fii*st evidence of the change was given in the ''En- 
cyclopaedia Britannica," which in Vol. XIX. of the ninth 
edition, printed in 1886, discarded the dogmatic article on 
the science of political economy, which had been printed 
in previous editions, and on the plea that political economy 
was really in a transition state, and a dogmatic treatise 
would not be opportune, gave the space instead to an 
article on the science of political economy by Professor 



206 THE NATUEE OF WEALTH. Bool 11. 

J. K. Ingram, whicli undertook to review all that had been 
written about it, and was almost immediately reprinted in 
an 8vo volume with an introduction by Professor E. J. 
James, of the University of Pennsylvania, the leading 
American protectionist institution of learning. 

This confession that the old political economy was dead 
was written in the " good God, good devil," or historical 
style, and consisted in a notice of the writers on political 
economy, from the most ancient times, through a first, a 
second and a third modern phase, to the coming or histor- 
ical phase. 

Adam Smith is put down as leading in the third modern 
school— the system of natural liberty. Among the prede- 
cessors of Smith are reckoned the French Physiocrats, 
whose proposition for a single tax on the value of land is 
related to their doctrine of the productiveness of agricul- 
ture and the sterility of manufactures and commerce, 
"which has been disposed of by Smith and others, and 
falls to the ground with the doctrine on which it was 
based ; " and Smith himself is treated as a respectable '' has- 
been," whose teachings must now give way to the wider 
criticism and larger knowledge of the historical school, 
"Writers of France, Spain, Germany, Italy and northern 
nations are referred to in the utmost profusion, but there 
is no reference whatever to the man or the book that was 
then exerting more influence upon thought and finding 
more purchasers than all the rest of them combined, an 
example which has been followed to this day in the elabo- 
rate four- volume" Dictionary of Political Economy," edited 
by R. H. Inglis Palgrave. 

This action was enough. The encyclopaedias and dic- 
tionaries printed since have followed this example of the 
Britannica. Chambers, which was the first to print a new 
and revised edition, and Johnson's, which soon followed, 
concluded in 1896, discarded what they had previously 



CJtap.rill. THE SCHOLASTIC BEEAKDOWN. 207 

printed as the teaching of political economy for articles 
in the style of the Britannica's ; while the new dictionaries 
are repeatedly giving place to the jargon which has been 
introduced as economic terms. 

As for the University of Pennsylvania, the great au- 
thority of American scholastic protectionism, it may be 
said that it soon after relegated to a back seat its Professor 
of Political Economy, Professor Eobert Ellis Thompson, 
a Scotsman, who had been up to that time teaching the 
best scientific justification of protectionism that could be 
had, and has put in his place the Professor E. J. James 
already spoken of, and thrown its whole influence and re- 
sources into the teaching of protection by the Anglicized 
historical and inductive method, under a new though 
rarely mentioned name. The new science speaks of the 
"science of economics" and not of "political economy;" 
teaches that there are no eternally valid natural laws ; and, 
asked if free trade or protection be beneficial or if the trusts 
be good or bad, declines to give a categorical answer, but 
replies that this can be decided only as to the particular 
time and place, and by a historical investigation of all 
that has been written about it. As such inquiry must, of 
course, be left to professors and learned men, it leaves the 
professors of "economics," who have almost universally 
taken the places founded for professors of " political econ- 
omy," to dictate as they please, without any semblance of 
embarrassing axioms or rules. How this lends itself to 
an acquiescence in the views or v/hims of the wealthy class, 
dominant in all colleges, the University of Pennsylvania, 
controlled in the interests of protectionists for revenue 
only, was the first to find out, but it has been rapidly and 
generally followed. 

Such inquiry as I have been able to make of the recently 
published works and writings of the authoritative pro- 
fessors of the science has convinced me that this change 



208 THE NATURE OF WEALTH. BoolcII. 

has been general among all the colleges, both of England 
and the United States. So general is this scholastic utter- 
ance that it may now be said that the science of political 
economy, as founded by Adam Smith and taught authori- 
tatively in 1880, has now been utterly abandoned, its teach- 
ings being referred to as teachings of " the classical school" 
of political economy, now obsolete. 

"What has succeeded is usually denominated the Austrian 
school, for no other reason that I can discover than that 
" far kine have long horns." If it has any principles, I have 
been utterly unable to find them. The inquirer is usually 
referred to the incomprehensible works of Professor Alfred 
Marshall of Cambridge, England, whose first 764-page 
volume of his ^'Principles of Economics," out in 1891, has 
not yet given place to a second ; to the poiiderous works of 
Eugen V. Bohm-Bawerk, Professor of Political Economy, 
first in Innsbruck and then at Vienna, " Capital and In- 
terest" and "The Positive Theory of Capital," translated 
by Professor William Smart of Glasgow ; or to Professor 
Smart's " Introduction to the Theory of Value on the Lines 
of Menger, Wieser and Bohm-Bawerk," or to a lot of Ger- 
man works written by men he never heard of and whose 
names he cannot even pronounce. 

This pseudo-science gets its name from a foreign lan- 
guage, and uses for its terms words adapted from the 
German— words that have no place and no meaning in an 
Enghsh work. It is, indeed, admirably calculated to serve 
the pm'pose of those powerful interests dominant in the 
colleges under our organization, that must fear a simple 
and understandable political economy, and who vaguely 
wish to have the poor boys who are subjected to it by 
their professors rendered incapable of thought on economic 
subjects. There is nothing that suggests so much what 
SchojDenhauer ("Parerga and Paralipomena ") said of the 
works of tlie German philosopher Hegel than what the 



Chaxi.rill. THE SCHOLASTIC BREAKDOWN. 209 

professors have written, and the vohunes for mutual ad- 
miration wliicli they publish as serials : 

If one should wish to make a bright young man so stupid as to 
become incapable of all real thinking, the best way would be to 
commend to him a diligent study of these works. For these monstrous 
piecings together of words which really destroy and contradict one 
another so causes the mind to vainly torment itself in the effort to 
discover their meaning that at last it collapses exhausted, with its 
capacity for thinking so completely destroyed that from that time on 
meaningless phrases count with it for thoughts. 

It is to this state that pohtical economy in the teachings 
of the schools, which profess to know all about it, has now 
come. 



CHAPTER IX. 
WEALTH AND VALUE. 

SHOWING THE REASON FOR CONSIDERING THE NATURE OF 
VALUE BEFORE THAT OF WEALTH. 

The point of agreement as to wealth.— Advantages of proceeding 
from this point. 

WE have seen the utter confusion that exists among 
economists as to the nature of wealth, and have 
sufficiently shown its causes and results. Let us return 
now to the question we have in hand, and that must first 
be settled before we can advance on solid ground : What 
is the meaning of wealth as an economic term ? 

The lack of definiteness and want of consistency as to 
the nature of the wealth of nations, with which Adam 
Smith began, have in the hands of his accredited succes- 
sors resulted in confusion so much worse confounded that 
the only proposition as to wealth on which we may say 
that aU economists are agreed is that all wealth has value. 
But as to whether all that has value is wealth, or as to 
what forms of value are wealth and what not, there is wide 
divergence. And if we consider the definitions that are 
given in accepted works either of the term wealth or of 
the sub-term of wealth, capital, it will be seen that the 
confusions as to the nature of wealth which they show 
seem to proceed from confusions as to the nature of value. 

210 



Chap. IX. WEALTH AND VALUE. 211 

It is quite possible, I think, to fix the meaning of the 
term wealth without first fixing the meaning of the term 
value. This I did in "Progress and Poverty," where 
my purpose in defining the meaning of wealth was to 
fix the meaning of its sub-term, capital, in order to see 
whether or not it is true that wages are drawn from 
capital. But as in the present work, being a treatise on 
the whole subject of political economy, it wiU be necessary 
to treat independently of the nature of value, it will, I 
think, be more conducive to orderly and concise arrange- 
ment to consider the nature of value before proceeding 
definitely to the consideration of the nature of wealth. 

And since minds that have been befogged by accepted 
confusions may be more easily opened to the truth by 
pointing out in what these confusions consist, and how 
they originate, this mode of proceeding to a determination 
of the nature of wealth through an examination of the 
natui'e of value will have the advantage of meeting on the 
way the confusions as to value which in the minds of the 
students of the scholastic economy have perplexed the idea 
of wealth. 



CHAPTER X. 
VALUE IN USE AND VALUE IN EXCHANGE. 

SHOWING THE TWO SENSES OF VALUE; HOW THE DISTINC- 
TION HAS BEEN IGNORED, AND ITS REAL VALIDITY; AND 
THE REASON FOR CONFINING THE ECONOMC TERM TO ONE 

SENSE. 

Importance of the term value— Original meaning of the word- 
Its two senses— Names for them adopted by Smith— Utility and 
desirability— Mill's criticism of Smith— Complete ignoring of the 
distinction by the Austrian school— Cause of this confusion — 
Capability of use not usefulness — Smith's distinction a real one 
—The dual use of one word in common speech must be avoided in 
political economy— Intrinsic value. 

^HE term value is of most fundamental importance 
in political economy ; so much, so that by some wi'iters 
political economy has been styled the science of values. 
Yet in the consideration of the meaning and nature of 
value we come at once into the very quicksand and f ogland 
of economic discussion — a point which from the time of 
Adam Smith to the present has been wrapped in increasing 
confusions and beset with endless controversy. Let us 
move carefully, even at the cost of what may seem at the 
moment needless pains, for here is a point from which 
apparently slight divergences may ultimately distort con- 
clusions as to matters of the utmost practical moment. 

212 



Chap. X. THE TWO SENSES OF VALUE. 213 

The original and widest meaning of the word " value " is 
that of worth or worthiness, which involves and expresses 
the idea of esteem or regard. 

But we esteem some things for their own qualities or 
for uses to which they may be directly put, while we esteem 
other things for what they will bring in exchange. We 
do not distinguish the kind or reason of regard in our use 
of the word esteem, nor yet is there any need of doing 
so in our common use of the word value. The sense in 
which the word value is used, when not expressed in 
the associated words or context, is for common pur]30ses 
sufficiently indicated by the conditions or nature of the 
thing to which value is attributed. Thus, the one word 
value has in common English speech tvfo distinct senses. 
One is that of usefulness or utility— as when we speak of 
the value of the ocean to man, the value of the compass in 
navigation, the value of the stethoscope in the diagnosis 
of disease, the value of the antiseptic treatment in surgery ; 
or when, having in mind the merits of the mental produc- 
tion, its quality of usefulness to the reader or to the public, 
we speak of the value of a book. 

The other and, though derived, utterly distinct sense of 
the word value, is that of what is usually, and for most 
purposes even of political economy, sufficiently described 
as exchangeability or purchasing power— as when we speak 
of the value of gold as greater than that of iron ; of a book 
in rich binding as being more valuable than the same book 
in plain binding ; of the value of a copyright or a patent ; 
or of the lessening in the value of steel by the Bessemer 
process, or in that of aluminium by the improvements in 
extraction now going on. 

The fii'st sense of the word value, which is that of use- 
fulness, the quality that a thing may have of ministering 
du-ectly to human needs, was distinguished by Adam Smith 
as '' value in use." 



214 THE NATUEE OF WEALTH. Book II. 

The second sense of the word value, which is that of 
worth in transfer or trade, the quality that a thing may 
have of ministering indirectly to human desire through 
its exchangeability for other things, was distinguished by 
Adam Smith as " value in exchange." 

Adam Smith's words are (Book I,, Chapter IV.) : 

The word " value," it is to be observed, has two different meanings, 
and sometimes expresses the utility of some particular object, and 
sometimes the power of purchasing other goods which the possession 
of that object conveys. The one may be called "value in use ; " the 
other, "value in exchange." The things which have the greatest 
value in use have frequently little or no value in exchange ; and, on 
the contrary, those which have the greatest value in exchange have 
frequently little or no value in use. Nothing is more useful than 
water ; but it will purchase scarce anything ; scarce anything can be 
had in exchange for it. A diamond, on the contrary, has scarce any 
value in use, but a very great quantity of goods may fi'equently be 
had in exchange for it. 

These two terms, adopted by Adam Smith, as best ex- 
pressing the two distinct senses of the word value, at once 
took their place in the accepted economic terminology, and 
have since his time been generally used. 

But though the terms of distinction which he used have 
been from the first accepted, this has not been the case 
with the distinction itself. From the first, his successors 
and commentators began to question its validity, declaring 
that nothing could have exchange value for which there 
was not demand ; that demand implied some kind of utility 
or usefulness, and hence that what has value in exchange 
must also have value in use ; and that Smith had been led 
into confusion by a disposition to import moral distinc- 
tions into a science that knows nothing of moral distinc- 
tions. This view has been generally, so far indeed as I 
know universally, accepted by political economists.* 

* There is a latent confusion in the use of a word to which I must 
here call attention, as I have in previous writings slipped into this 



Chap. X. THE TWO SENSES OF VALUE. 215 

Thus, Jolin Stuart Mill (whom I take as the best ex- 
ponent of the scholastically accepted political economy up 
to the time when the Austrian or psychological school 
began to become the " fad " of confused professors), begins 
his treatment of value by pointing out that " the smallest 
error on that subject infects with corresponding error all 
our other conclusions, and anything vague or misty in our 
conceptions of it creates confusion and uncertainty in 
everything else." And he thus proceeds ("Principles of 
Political Economy," Book III., Chapter I., Sec. 1) : 

We must begin by settling our phraseology. Adam Smith, in a 
passage often quoted, has touched upon the most obvious ambiguity 
of the word "value ; " which, in one of its senses, signifies usefulness, 
in another, power of purchasing ; in his own language, value in use 
and value in exchange. But (as Mr. De Quincey has remarked) in 
illustrating this double meaning, Adam Smith has himself fallen into 
another ambiguity. Things (he says) which have the greatest value 
in use have often little or no value in exchange ; which is true, since 
that which can be obtained without labor or sacrifice will command 
no price, however useful or needful it inay be. But he proceeds 

use myself. The word " utility " correctly expresses the idea of what 
gives value in use— the qiiality of usefulness. And the word "de- 
sirability " is sometimes used by economists to express the contrasted 
idea, of what gives value in exchange, the quality of being desired, 
though not necessarily satisfying a need or useful purpose. Such use 
seems convenient and has some sanction in economic writing, and I 
see that I have fallen into it in Part I., Chapter V., of my "A Per- 
plexed Philosopher," where I say : 

"If we inquire what is the attribute or condition concurring with 
the presence, absence or degree of value attaching to anj^thing— we 
see that things having some form of utility or desirability, are valu- 
able or not valuable, as they are hard or easy to get." 

Yet in reality such use of the word is not correct. There is a dif- 
ficulty in using the word "desirability" in distinction to "utility." 
"Utility" means the capability of being used, and by analogy "de- 
sirability" should mean the capability of being desired. Yet if it 
did, it would not be the word we need to contrast with utility. For 
words of distinction must be words of restriction, as are "utility" 



216 THE NATUEE OF WEALTH. Booh 11. 

to add, tliat things whicli have the greatest value in exchange, as a 
diamond for example, may have little or no value in use. This is 
employing the word "use," not in the sense in which political economy 
is concerned with it, but in that other sense in which use is opposed to 
pleasure. Political economy has nothing to do with the comparative 
estimation of different uses in the judgment of a philosopher or of 
a moralist. The use of a thing, in political economy, means its 
capacity to satisfy a desire, or serve a purpose. Diamonds have this 
capacity in a high degree, and unless they had it, would not bear any 
price. Value in use, or, as Mr. De Quineey calls it, "teleologic" 
value, is the extreme limit of value in exchange. The exchange value 
of a thing may fall short, to any amount, of its value in use ; but that 
it can ever exceed the value in use implies contradiction ; it supposes 
that persons will give, to possess a thing, more than the utmost value 
which they themselves put upon it, as a means of gratifying their 
inclinations. 

The word "value," when used without adjunct, always means, in 
political economy, value in exchange. 



or "usefulness "—expressing a capability in some things which other 
things do not have. "Desirability," however, even if it had or we 
could give it the sense of capability of being desired, would not be 
a word of restriction, since anything without exception may be de- 
sired, and what we really want is not a word which expresses the 
capability of being desired, but the fact of being desired. "Desir- 
ability " in its well-established use, however, does not mean the capa- 
bility of being desired, as "utility " means the capability of beingused. 
When we say that a thing is desirable or undesirable, we do not mean 
that it may or may not be desired, nor that it is or is not desired, 
but that it ought or ought not to be desired. Thus, a desirable 
exchange or trade is an exchange which, wit-h reference to the party 
considered, will prove a good one. An undesirable exchange is one 
that will to the party considered prove a bad one. So we speak of 
a desirable book, horse, beverage, food, medicine, appetite, habit, 
thought, feeling or gratification, with reference to an ultimate benefit 
or injury to the person or persons specially considered or to mankind 
generally. So, indeed, we may speak even of a desirable or unde- 
sirable desire. The reason why there is no word in the English lan- 
guage which expresses the idea I wish to express, and which if at 
liberty to coin a word I should call "desiredness," is that the one 
word, "value," serving in common speech for both senses, there is 
no common need for it. 



ChcqhX. THE TWO SENSES OF VALUE. 217 

Here is a queer settlement of phraseology. Let us pick 
out the positive statements. They are : That Adam Smith 
was wi'ong in saying that things which have the greatest 
value in exchange, as a diamond, may have little or no 
value in use, because the use of a thing in political econ- 
omy, which knows nothing of any moral estimate of uses, 
means its capacity to satisfy a desire or serve a pui'pose— 
a capacity which diamonds have in high degree, and unless 
they had it would not have any value in exchange (" bear 
any price")- Value in use is the highest possible ("ex- 
treme limit of ") value in exchange. The exchange value 
of a thing can never exceed the use value of a thing. To 
suppose that it could implies a contradiction— that persons 
will give to possess a thing more than its utmost use value 
to them ("value which they themselves put upon it as a 
means of gratifying their inclinations"). 

In this there is a complete identification of value in use, 
utility or usefulness, with value in exchange, exchange- 
ability or purchasing power. What then becomes of 
Mill's other statement in the same paragraph ? If Adam 
Smith was wrong in saying that the exchange value of a 
thing may be more than its use value, how could he be 
right in saying that the exchange value of a thing may be 
less than its use value ? If value in use is the highest limit 
of value in exchange, is it not necessarily the lowest limit ? 
If diamonds derive their exchange value from their capacity 
to satisfy a desire or serve a purpose, do not beans °? If 
value in exchange means merely value in use, why does 
Mr. Mill distinguish between the two senses of the word 
value, that of usefulness, and that of purchasing power? 
Why does he tell us that the word value, when used with- 
out adjunct, always means in political economy value in 
exchange? Why keep up a distinction where there is 
really no difference ? 

In this identification of utility with " desiredness " (which 
I have merely quoted Mill to illustrate, for it began imme- 



218 THE NATURE OF WEALTH. BooTcIL 

diately after Adam Smith, and was well rooted in the cur- 
rent political economy long before Mill, as he indeed 
declares, saying in the fli'st paragraph of his treatment of 
values, ''Happily there is nothing in the laws of value 
which remains for the present or any future writer to clear 
up ; the theory of the subject is complete ") is the begin- 
ning of that theory of value as springing from marginal 
utilities of which Jevons was the first English expounder, 
and which has been carried to elaborate development by 
what is known as the Austrian or psychological school. 
This school, setting aside all distinction between value in 
use and value in exchange, makes value without distinc- 
tion an expression of the intensity of desire, thus tracing 
it to a purely mental or subjective origin. In this theory 
the intensity of the desire of the bread-eater to eat bread 
fixes the extreme or marginal utility of bread. This again 
fixes the utility of the products of which bread is made— 
flour, yeast, fuel, etc.— and of the tools used in making it 
—ovens, pans, etc.— and again of the natural materials 
used in making these products, and finally of the land and 
labor. 

But all this elaborate pihng of confusion on confusion 
originates, as we may see in Mill, in a careless use of 
words. Nothing indeed could more strikingly illustrate 
the need of the warning as to the use of words in political 
economy which I endeavored to impress on the reader in 
the introductory chapter of this work than the spectacle 
here presented of the author of the most elaborate work 
on logic in the English language falling into vital error in 
what he himseK declares to be a most fundamental ques- 
tion of political economy, from failure to apprehend a 
distinction in the meaning of two common words. Yet 
here plainly enough is the source of Mill's acceptance of 
what much inferior thinkers to Adam Smith had deemed 
a correction of the great Scotsman. The gist of liis argu- 



Chap.X. THE TWO SENSES OF VALUE. 219 

ment is that the capability of '' a use," iu the sense of sat- 
isfying a desire or serving a purpose, is identical with 
usefulness. But this is not so. Every child learns long 
before he reaches his teens that the capability of a use is 
not usefulness. Here, for instance, is a dialogue such as 
every one who has gone to an old-fashioned primary school 
or mixed as a boy with boys must have heard time and 
again : 

First Boy— What's the use of that crooked pin you're 
bending ? 

Second Boy— What's the use ! Its use is to lay it on 
a seat some fellow is just going to sit down on, and to 
make him jump and squeal, and to hear the teacher charg- 
ing around while you're busy studying your lesson, and 
don't know anything about what's the matter. 

This is certainly a use; but would any one, even a 
school-boy, attribute usefulness to such a use ? 

So, the wearing of nose-rings by some savages; the 
tattooing of their bodies by other savages, and by sailors ; 
the squeezing of their waists by civilized women ; the mon- 
strous structures into which the hair of fashionable Euro- 
pean ladies was built in the last century ; the hooped skirts 
worn during a part of this ; the pitiful distortion practised 
on the feet of upper-class female infants by the Chinese, 
are all uses. But do they therefore imply usefulness ? 

Again, the thumb-screws brought from Russia by Drum- 
mond and Dalziel, when they were sent to Scotland by 
Charles 11. to force Episcopacy upon the Covenanters, had 
" a use." The racks which the English captors of the ships 
of the Spanish Armada were said to have found in those 
vessels, intended, as was believed, for the purpose of con- 
Alerting English Protestants to the true faith of Rome, had 
also a capacity of satisfjdng a devilish desire. They had 
unquestionably at that time value in exchange, and indeed, 
if still in existence, would have value in exchange now, for 



220 THE NATURE OF WEALTH. BoolcII. 

they would be purcliased for museums j and I do not see 
how they could at that time have been refused, or if in 
existence, could now be refused, a place in any category 
of articles of wealth. But were they useful articles ? No 
one would now say so. There were, it is true, at that time 
some people who might have contended for their useful- 
ness. But consider the supposition under which alone 
this claim for their usefulness could have been made, for 
it points to an essential distinction between the meaning 
of usefulness and that of mere capacity for use. The 
thumb-screws and racks could have been considered as 
useful only on the assumption that the eternal salva,tion of 
men, their exemption from endless torture, depended on 
their acceptance of certain theological beliefs, and there- 
fore that the rooting out of schism and heresy, even by the 
use of temporal tortui'e, was conducive to the true welfare 
and final happiness of the generality of mankind. 

To consider this is to see that what is really the essen- 
tial idea of usefulness, of that quality of a thing which 
Adam Smith distinguished as utility or value in use, is, 
not the capability of any use, but the capability of use in 
the satisfaction of the natural, normal and general desires 
of men. 

And in this Adam Smith, following the Physiocrats, 
recognized a distinction that he did not create, and that 
no confusions of current economic teaching can eradicate ; 
a distinction that does not come from the refinements of 
philosophers or moralists, but that rests on common per- 
ceptions of the human mind— the distinction, namely, be- 
tween things which in themselves or in their uses conduce 
to well-being and happiness and the things which in them- 
selves or in their uses involve fruitless effort or ultimate 
injury and pain. The capacity of satisfying some desire, 
no matter how idle, vicious or cruel, is indeed all that is 
necessary to exchangeability or value in exchange. But 



Chap. X. THE TWO SENSES OF VALUE. 221 

to give usefulness or value in use something more is neces- 
sary, and that is the capacity to satisfy, not any possible 
desire, but those desires which we call needs or wants, and 
which, lying lower in the order of desires, are felt by all 
men.* 

Value in use and value in exchange may and often do 
attach to the same things, and, as a matter of fact, doubt- 
less the great majority of things having value in exchange 
have also value in use. But this connection is not neces- 
sary, and the two qualities have no relation whatever to 
each other. A thing may have use value in the highest 
degree, yet very little exchange value or none at all. A 
thing may have exchange value in very high degree and 
little or no use value. Air has the highest value in use, 
as without air we could not live a minute. But this 
supreme utility does not give air exchange value. The 
Bambino of Rome or the Holy Coat of Treves could prob- 
ably be exchanged, as similar venerated objects have been 
at times exchanged, for enormous sums ; but the use value 
of the one is that of a wax doll baby, that of the other an 
old rag. The two qualities of value in use and value in 
exchange are as essentially different and unrelatable as 
are weight and color, though as we sometimes speak of 
heavy browns and light blues, so do we in common speech 
use the word value now to express one of these qualities 
and now the other. The quality of value in use is an in- 
trinsic or inherent quality attaching to the thing itself, and 
giving to it fitness to satisfy man's needs. It cannot have 
value in use except it has that, and as it has that, no matter 
what be its value in exchange. And its use value is the 
same whether much can be obtained for it in exchange or 
" no one would pick it up." The quality of value in ex- 
change, on the other hand, is not intrinsic or inherent. 

* As explained in Book I., ChaDter XI. 



222 THE NATUEE OF WEALTH. BoolcIL 

There is, to be sure, a special sense in whicli, comf orm- 
ably to usage, we may speak in certain cases of an intrinsic 
value as applying to the part of the value which comes 
wholly from the estimate of man, and where in reality in- 
herent or intrinsic value cannot exist. The cases in which 
we do this are cases in which we wish to distinguish be- 
tween the exchange value which a thing may have in a 
higher or more valuable form and that exchange value 
which still remains if it were reduced to a lower or less 
valuable form. Thus, a silver pitcher or a United States 
silver coin would loose exchange value if beaten into in- 
gots ; or a coil of lead pipe or a ship's anchor and cable 
would lose in exchange value if melted into pigs. Yet 
they would retain the exchange value of the metal from 
which they were made. This value in exchange which 
would remain in a lower form we are accustomed to speak 
of as " intrinsic value." But in using this term we should 
always remember its merely relative sense. Value in the 
economic sense, or value in exchange, can never really be 
intrinsic. It refers not to any property of the thing itself, 
but to an estimate that is placed on it by man — to the toil 
and trouble that men will undergo to acquire possession 
of it, or the amount of other things costing toil and trouble 
that they will give for it. 

Nor is there any common measure in the human mind 
between usefulness and exchangeability. Whether we 
most esteem a thing for the intrinsic qualities that give it 
usefulness, or for its intrinsic qualit}^ of commanding other 
things in exchange, depends upon conditions. 

A daring fellow recently crossed from the coast of Nor- 
way to the United States in a sixteen-foot boat. Suppos- 
ing him to come to New York, and one of our hundredfold 
millionaires, in the fashion of an Arabian Nights' Sultan, 
to say to him : "If you will make a trip at my direction 
you may fill up your boat at my expense with anything 



Chap. X. THE TWO SENSES OF VALUE. 223 

you choose to take from New York, regardless of its cost." 
What would he fill it up with ? That could not be an- 
swered in a word, as it would entirely depend upon where 
the millionaire wanted him to go. If he were merely to 
cross the North River from New York to Jersey City, he 
would disregard value in use and fill up with what had the 
highest value' in exchange, in comparison to bulk and 
weight— gold, diamonds, paper money. To carry the more 
of these he would leave out everything having value in use 
that he could get along without for an hour or two— even 
to extra sails, anchor, sea-drag, compass, a morsel of food 
or a drink of water. But if he were to cross the Atlantic 
again, his first care would be for things useful in the 
management of his boat and the maintenance of his own 
life and comfort during the long months of danger and 
solitude before he could hope again to reach land. He 
would regard value in use, disregarding value in exchange. 
If he had not lost the prudence which, no less than daring, 
is required successfully to make such a trip, it may well be 
doubted whether he would not prefer to carry its weight 
in fresh water than to take a single diamond or gold piece 
and prefer another can of biscuit or condensed beef to 
the last bundle of thousand-dollar notes that he might take 
instead. 

Adam Smith was right. The distinction between value 
in use and value in exchange is an essential one. It is so 
clear and true and necessary that, as we have seen, John 
Stuart Mill could not refrain from partially recognizing it 
in the very breath in which he had eliminated it altogether, 
and the later economists who have carried the confusion 
which he expresses to a point of more elaborate confusion 
are also compelled to recognize it the moment they get out 
of the fog of ill-understood words. Despite all attempts 
to confuse and obliterate them, " value in use " and " value 
in exchange " must stiU hold their place in economic ter- 



224 THE NATUEE OF WEALTH. Bool 11. 

minology. The terms themselves are perhaps not the 
happiest that might be chosen. But so long have they 
now been used that it would be difficult to substitute any- 
thing in their place. It is only necessary to do what Adam 
Smith could hardly have deemed necessary— point out 
what they really mean. They were taken indeed by him 
from common speech, and still retain the great advantage 
to any economic term of being generally inteUigible, 

In common speech the one word value, as I have already 
said, usually suffices to express either value in use or value 
in exchange. For which sense of the word value is meant 
is ordinarily indicated with sufficient clearness either by 
the context or by the situation or nature of the thing spoken 
of. But in cases where there is no indication thus sup- 
plied, or the indication is not sufficiently clear, the use of 
the word ''value" will at once provoke a question equivalent 
to ''Do you mean value for use or value for exchange ? " 

Thus, if a man says to me, " That is a valuable dog, he 
saved a child from drowning ; " I know that the value he 
means is value in use. If he says, however, "That is a 
valuable dog, his brother brought a hundred dollars ; " I 
know that he has in mind value in exchange. Even where 
he says simply, " That is a valuable dog," there is generally 
some indication that enables me to tell what sense of value 
he has in mind. If there is none, and I am interested 
enough to care, I ask for it by such question as " Why ? " 
or "What for?" 

In economic reasoning, however, the danger of using 
one word to represent two distinct and often contrasted 
ideas is very much greater than in common speech, and if 
the word is to be retained, one of its senses must be 
abandoned. Of the two meanings of the word value, the 
first, that of value in use, is not called for, or called for 
only incidentally in political economy ; while the second, 
that of value in exchange, is called for continually, for 



Chap. X. THE TWO SENSES OF VALUE. 225 

this is the value with which political economy deals. To 
economize the use of words, while at the same time 
avoiding liability to misunderstanding and confusion, it 
is expedient, therefore, to restrict the use of the word 
value, as an economic term, to the meaning of value in 
exchange, as was done b}^ Adam Smith, and has since his 
time generally been followed ; and to discard the use of 
the single word value in the sense of value in use, sub- 
stituting for it where there is occasion to express the 
idea of value in use, and the close context does not clearly 
show the limitation of meaning, either the term ^' value in 
use " or some such word as usefulness or utility. This I 
shall endeavor to do in this work— using hereafter the 
single term value, as meaning purchasing power or " value 
in exchange." 



CHAPTER XI. 

ECONOMIC VALUE-ITS REAL MEANINa AND 
FINAL MEASURE. 

SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A 
RELATION OF PROPORTION; AND THE AMBIGUITY WHICH 
HAS LED TO THIS. 

The conception of value as a relation of proportion— It is really a 
relation to exertion— Adam Smith's perception of this— His rea- 
sons for accepting the term value in exchange— His confusion 
and that of his successors. 

VALUE, as an economic term, means, as we have seen, 
what in defining it from the other sense of the word 
value, is known as value in exchange, or exchangeability. 
And to this meaning alone I shall, when using the word 
value without adjunct, hereafter confine it. 

But from what does this quality of value in exchange, 
or exchangeability, proceed ? And by what may we mea- 
sure it ? 

As to this the current teachings of pohtical economy 
are, that value, the quality or power of exchangeability, is 
a relation between each exchangeable thing and all other 
exchangeable things. Thus, it is said, there can be no 
general increase or decrease of values, since what one val- 
uable thing may gain in exchange power, some other val- 
uable thing or things must lose ; and what one loses some 

22G 



Chap. XL ECONOMIC VALUE. 227 

other or others must gain. In other words, the relation 
of value being a relation of ratio or proportion, any change 
in one ratio must involve reverse changes in other ratios, 
since the sum total of ratios can neither be increased nor 
diminished. There may be increase or decrease of value 
in any one or more things, as compared with any other 
one or more things; but no increase or decrease in all 
values at once. All prices, for instance, may increase or 
diminish, because price is a relation of exchangeabihty 
between all other exchangeable things and one particular 
exchangeable thing, money; and increase or decrease of 
price (greater or less exchangeability of other things for 
money) involves correlatively decrease or increase of the 
exchangeability of money for other things. But increase 
or decrease in value generally {i.e., all values) is a contra- 
diction in terms. 

This view has a certain plausibility. Yet to examine it 
is to see that it makes value dependent on value without 
possibility of measurement except arbitrarily and rela- 
tively, by comparing one value "with another ; that it leaves 
the idea of value swimming, as it were, in vacancy, with- 
out connection or fixed starting-point, such as we attach 
to all other qualities of relation, and without which any 
definite idea of relation is impossible. 

Thus, such qualities as size, distance, direction, color, 
consanguinity and the like are only comprehensible and 
intelligible to us by reference to some fixed starting-point, 
to which and not to all other things having the same 
quality the relation is made. Size and distance, for in- 
stance, are comprehended and intelligibly expressed as 
relations to certain measures of extension, such as the 
barleycorn, the foot, the meter, diameters of the earth, or 
diameters of the earth's orbit ; direction, as a relation to 
the radii of a sphere, which, proceeding from a central 
point, would include all possible directions; color, as a 



228 THE NATUEE OF WEALTH. Booh II. 

relation to the order in which certain impressions are re- 
ceived through the human eye ; consanguinity, as a relation 
in blood to the primary blood-relationship, that between 
parent and child ; and so on. 

Now, has not also the idea of value some fixed starting- 
point, by which it becomes comprehensible and intelligible, 
as have all other ideas of relation ? 

Clearly it has. What the idea of value really springs 
from, is not the relation of each thing having value to all 
things having value, but the relation of each thing having 
value to something which is the source and natural mea- 
sure of all value— namely, human exertion, with its atten- 
dant irksomeness or weariness. 

Adam Smith saw this, though he may not have consis- 
tently held to it, as was the case with some other things he 
clearly saw for a moment, as through a rift in clouds which 
afterwards closed up again. In the first paragraphs of 
Chapter V., Book I., " Wealth of Nations," he says ; 

Every man is rich or poor aeeording to the degree in which he 
can afford to enjoy the necessaries, conveniences and amusements of 
human life. But after the di^dsion of labor has once thoi'oughly 
taken place, it is but a very small part of these with which a man's 
own labor can supply him. The far greater part of them he must 
derive from the labor of other people, and he must be rich or poor 
according to the quantity of that labor which he can command, or 
which he can afford to j)urehase. The value of any commodity, 
therefore, to the person who possesses it, and who means not to use 
or consume it himself, but to exchange it for other commodities, is 
equal to the quantity of labor which it enables him to purchase or 
command. Labor, therefore, is the real measure of the exchangeable 
value of all commodities. 

The real price of everything, what everything really costs to the 
man who wants to acquire it, is the toil and trouble of acquiring it. 
"What everything is really worth to the man who has acquired it, and 
who wants to dispose of it or exchange it for something else, is the 
toil and trouble which it can save to himself, and which it can impose 
upon other people. Wliat is bought with money or with goods is 
purchased by labor, as much as what we acquire by the toil of our 



Clm'p. XL ECONOMIC VALUE. 229 

own body. That money or those goods indeed save ns this toil. 
They contain the value of a certain quantity of labor, which we ex- 
change for what is supposed at the time to contain the value of an 
equal quantity. Labor was the first price, the original purchase 
money that was paid for all things. It was not by gold or by silver, 
but by laboi', that all the wealth of the world was originally pur- 
chased; and its value, to those who possess it, and who want to 
exchange it for some new productions, is precisely equal to the 
quantity of labor which it can enable them to pui'chase or command. 
Wealth, as Mr. Hobbes says, is power. But the person who either 
acquires or succeeds to a great fortune, does not neeessaiily acquire 
or succeed to any political power, either civil or military. His for- 
time may perhaps aii'ord him the means of acquiring both, but the 
mere possession of that fortune does not necessarily convey to him 
either. The' power which that possession immediately and directly 
conveys to him is the power of purchasing ; a certain command over 
all the labor, or over all the produce of labor which is then in the 
market. His fortune is greater or less precisely in proportion to the 
extent of this power ; or to the quantity of other men's labor, or, 
what is the same thing, of the produce of other men's labor which it 
enables him to pui'chase or command. The exchangeable value of 
everything must always be precisely equal to the extent of this 
power which it will convey to its owner. 

This is perfectly clear, if we attend only to the meaning 
Adam Smith puts upon the words he uses somewhat 
loosely. The sense in which he uses the word labor is 
that of exertion, with its inseparable attendants, toil and 
trouble. What he means by price, is cost in toil and 
trouble, as he indeed incidentally explains,* and by wealth 

* "Price," as an economic term, has come to mean value in terms 
of money, or at least in terms of one particular commodity ; but Adam 
Smith did not make this distinction. He uses the word "price" 
sometimes where he means "cost," and sometimes where he means 
"value." This use of price for value he once in a while indicates, 
as where, in Chapter VI., he speaks of "'price or exchangeable value," 
but in general lie leaves it to inference. Where it is necessary for 
him to make the distinction between what we now call value and 
what we now call price, he usually speaks of the one as "real price " 
and of the other as ''nominal price," meauiug by "real price" value 
in labor, and by "nominal price " value in money. 



230 THE NATUEE OF WEALTH. Booh II. 

he evidently means tlie products or tangible results of 
human exertion. What he says is that value is the equiva- 
lent of the toil and trouble of exertion, and that its mea- 
sure is the amount of toil and trouble that it will save to 
the owner or enable him by exchange to induce others to 
take for him. 

And he again repeats this statement a little further on 
in the same book : 

Equal quantities of labor, at all times and places, may be said to 
be of equal value to the laborer. In his ordinary state of health, 
strength and spirits ; in the ordinary degree of his skill and dexterity, 
he must always lay down the same portion of his ease, his liberty, 
and his happiness. The price which he pays must always be the 
same, whatever may be the quantity of goods which he receives in 
return for it. Of these indeed it may sometimes purchase a greater 
and sometimes a smaller quantity ; but it is their value which varies, 
not that of the labor v/hich purchases them. At all times and places 
that is dear which it is difficult to come at, or which it costs much 
labor to acquire ; and that cheap which is to be had easily, or with 
very little labor. Labor alone, therefore, never varying in its own 
value, is alone the ultimate and real standard by which the value of 
all commodities can at all times and places be estimated and com- 
pared. It is their real price ; money is their nominal price only. . . . 
Labor, therefore, it appears evidently, is the only universal, as well 
as the only accurate measure of value, or the only standard by which 
we can compare the values of different commodities at all times and 
at all places. 

How then is it that Adam Smith, when he needed a 
term which should express the second sense of the word 
value, did not adopt a phrase that would bring out the 
fundamental meaning of value in this sense, such, for in- 
stance, as '' value in toil," or " value in exertion," or " value 
in labor ; " but instead of any of them chose a phrase, 
"value in exchange," which refers directly to only a 
secondary and derivative meaning ? 

The reasons he himself gives, in what immediately fol- 
lows the first two paragraphs I have quoted : 



Chap. XL ECONOMIC VALUE. 231 

But though labor be the real measure of the exchangeable value 
of all commodities, it is not that by which their value is commonly- 
estimated. It is often difficult to ascertain the proportion between 
two different quantities of labor. The time spent in two different 
sorts of work will not always alone determine this proportion. The 
different degrees of hardship endui-ed, and of ingenuity exercised, 
must likewise be. taken into account. There may be more labor in 
an hour's hard work than in two hours' easy business ; or in an hour's 
application to a trade which it cost ten years' labor to learn, than in 
a month's industry at an ordinary and obvious employment. But it 
is not easy to find any accurate measiu'e either of hardship or inge- 
nuity. In exchanging, indeed, the different productions of different 
sorts of labor for one another, some allowance is commonly made for 
both. It is adjusted, however, not by any accm'ate measui-e, but by 
the higgling and the bargaining of the market, according to that sort 
of rough equality which, though not exact, is yet sufficient for carry- 
ing on the business of common life. 

Every commodity, besides, is more frequently exchanged for, and 
thereby compared with, other commodities than with labor. It is 
more natural therefore to estimate its exchangeable value by the 
quantity of some other commodity, than by that of the labor which 
it can purchase. The greater part of people, too, understand better 
what is meant by a quantity of a particular commodity than by a 
quantity of labor. The one is a plain and palpable object ; the other 
an abstract notion, which, though it can be made sufficiently intelli- 
gible, is not altogether so natural and obvious. 

There are here two reasons assigned for the choice of 
the term "value in exchange," to denote what Smith saw 
with perfect, though only momentary clearness, really to 
mean "value in exertion," or in the phi-aseology he uses, 
" value in labor." 

The first, and it is a weighty one, is that the term " value 
in exchange" was already familiar, and would be best 
understood in bringing out the distinction he wished to 
dwell upon— the difference between value in the economic 
sense and " value in use." 

The second, which indicates a confusion in the philoso- 
pher's own mind— the swiftness with which the clouds 
diifted over the star he had just seen— is that he could 



232 THE NATUEE OF WEALTH. Book II. 

think of nothing by which to measure the toil and trouble 
of exertion except time of application, which he truly saw 
could only measure quantity and not quality— that is to 
say, dui-ation, not intensity. He failed to recognize the 
obvious fact that if the toil and trouble of exertion dis- 
pensed with be the measure of value, then, correlatively, 
value must be the real measui*e of the toil and trouble of 
that exertion, and that the something he was seemingly 
looking for— some material thing or attribute which, as a 
yardstick measures length and a standard weight mea- 
sures mass, should, independently of " the higgling of the 
market," measure the toil and trouble of exertion — is not to 
be found, because it cannot exist, the only possibility of 
such a measurement lying in "the higgling of the market." 
For since toil and trouble, which constitute the resistance 
to exertion, are subjective feelings which cannot be objec- 
tively recognized until brought, through their influence 
upon action, into the objective field, there is no way of 
measuring them except by the inducement that will tempt 
men to undergo them in exertion, which can be determined 
only by competition or " the higgling of the market." 

So, for a good reason and a bad reason, Adam Smith, 
for the purpose of expressing the economic sense of the 
word value, chose the term "value in exchange." It 
would be too much to say that he made a bad choice, 
especially considering his time and the main purpose he 
had in mind, which was to show the absurdity of what 
was then called the mercantile system, and has since been 
re-christened the protective system. But the ambiguity 
involved in the term "value in exchange" has been a 
stumbling-block in political economy from his day to this, 
and, indeed, to the ambiguity concealed in his own chosen 
term Adam Smith himself fell a victim. Or perhaps, 
rather, it should be said, that the ambiguity of the term 
allowed him to retain confusions that were already in his 



Chaj). XL ECONOMIC VALUE. 233 

mind, save when in the paragraphs just quoted he 
momentarily brushed them away, only to have them recur 
again. It will be noticed that, in these paragraphs. Smith 
clearly distinguishes between labor and commodities, evi- 
dently meaning by commodities things produced by labor ; 
and that he seems clearly to understand by wealth the 
products of labor. But in other places he di*ops into the 
confusion of treating labor itself as a commodity, and of 
classing personal qualities, such as industry, skill, know- 
ledge, etc., as articles of wealth ; just as, in Chapter VIII., 
he clearly sees and correctly states the true origin and 
nature of wages where he says: ''The produce of labor 
constitutes the natural recompense or wages of labor," 
only almost immediately to abandon it and proceed to 
treat wages as supplied from the capital of the employer. 
Adam Smith was never called upon to revise or in any 
way to reconsider the statement of his great book as to 
the nature of value, the discussion on the subject having 
arisen since his death. His successors in political economy 
have been with few exceptions, not men of original 
thought, but the mere imitators, compilers and straw- 
splitters who usually follow a great work of genius. They 
have, without looking further, accepted the term used by 
him, "value in exchange," not merely in the same way 
that he accepted it, as a convenient, because a readily 
understood, name for a quality, but as expressing the na- 
ture of that quality. Thus Adam Smith's explanation of 
the essential relation of value to the exertion of labor has 
been virtually, if not utterly, ignored. And from looking 
further than exchangeability for an explanation of the 
nature of value, these succeeding economists have been 
dissuaded and debarred not only by certain facts not un- 
derstood, such as the fact that many things having value 
do not originate in labor, and by erroneous conceptions, 
such as that wliich treats labor itself as a commodity ; but 



234 THE NATURE OF WEALTH. BooTcII. 

by a greatly effective, though, doubtless in most cases a 
very vague recognitiou of the fact that danger to existing 
social institutions would follow any too searching an 
inquiry into the fundamental principle of value. A world 
of ingenuity has been expended and monstrous books have 
been written that it will tire a man to read and almost 
make him doubt his own sanity to try to understand, to 
solve the problem of the fundamental nature of value in 
exchange. Yet they have resulted in what are but pon- 
derous elaborations of confusion, for the good and sufficient 
reason that the essence or foundation of what we call value 
in exchange does not lie in exchangeability at all, but in 
something from which exchangeability springs— the toil 
and trouble attendant upon exertion. 

Let me endeavor, even at some length, to prove this in 
a succeeding chapter, for most vital and far-reaching eco- 
nomic issues are involved in this settlement of the meaning 
of a term. 



CHAPTER XII. 

VALUE IN EXCHANGE REALLY RELATED 
TO LABOR. 

SHOWING THAT VALUE DOES NOT COME PROM EXCHANGE- 
ABILITY, BUT EXCHANGEABILITY PROM VALUE, WHICH IS 
AN EXPRESSION OF THE SAVING OP LABOR INVOLVED IN 

POSSESSION. 

Eoot of the assumption that the sum of values cannot increase or 
diminish— The fundamental idea of proportion— We cannot really 
think of value in this way— The confusion that makes us imagine 
that we do— The tacit assumption and reluctance to examine that 
bolster the current notion— Imaginative experiment shows that 
value is related to labor— Common facts that prove this— CmTent 
assumption a fallacy of undistributed middle— Various senses of 
"labor" — Exertion positive and exertion negative — Re-statement 
of the proposition as to value— Of desire and its measurement- 
Causal relationship of value and exchangeability— Imaginative 
experiment showing that value may exist where exchange is im- 
possible—Value an expression of exertion avoided. 

FROM the assumption that economic value is not merely 
what we have found it convenient to call value in 
exchange, but in reality is exchangeability— a quality of 
power by which the owner of a valuable thing may, by 
surrendering his ownership to some one else, obtain from 
him by similar transfer the ownership of another valuable 
thing— value is thought of as proceeding from value, and 
existing in a circle of which each part must have a relation 
of proportion or ratio to all other parts. It is this that 

235 



236 THE NATUEE OF WEALTH. BooTcIL 

gives axiomatic semblance to the proposition that while 
there may be increase or decrease in some values, this 
must always involve reversely decrease or increase in some 
other values, and hence that increase or decrease of all 
values, or of the sum of values, is impossible. If value be 
really a relation of proportion, this indeed is self-evident. 

But is value really a relation of proportion or ratio ? 
What is the fundamental idea of proportion or ratio ? Is 
it not that of the relation of the parts of a whole to that 
whole? When we use such a phrase as one-eighth we 
mean the relation of a part represented as one of eight 
equal partitions to a whole represented by one. When we 
use such a phrase as 10 per cent, we mean a relation of a 
part represented by ten of 100 equal partitions to a whole 
represented by 100. So such propositions as ^ + ^ = ^; 
or .153 + .147 = .3; or 4 : 8 : : 6 : 12 ; or5% + 4% = 9%, 
depend for theii* validity upon the relations of the propor- 
tions spoken of to a whole or totality, which is the sum of 
all possible proportions. That there cannot be increase or 
decrease in all proportions follows from the axiom that a 
whole is equal to the sum of its parts. 

But if value be a relation of proportion or ratio, what 
is the whole which it implies ? How shall we express this 
totality? Or by what calculus shall we fix the relations 
of its parts, the numberless and constantly changing arti- 
cles of value ? Might we not as well try to think of or 
express the relation of each particular haii* of our heads to 
the sum of the haii's in the heads of all humanity ? 

The truth is that we cannot think of value in this way, 
nor do we really try to, and the more ingenious and elabo- 
rate the attempts that have been made to give something 
like solid support and logical coherency to the prevailing 
theory that value is reaUy nothing more than exchange- 
ability only the more clearly show its utter inadequacy. 
Thus the latest and most elaborate of these attempts, that 



Cliaj).Xn. VALUE IN EXCHANGE AND LABOR. 237 

of the Austrian or psyciiological school, which has been of 
recent years so generally accepted in the universities and 
colleges of the United States and England, and which de- 
rives value from what it calls ''marginal utilities," is an 
attempt to emulate in economic reasoning the stories told 
of East Indian jugglers, who throwing a ball of thread into 
the air, pull up by it a stouter thread, then a rope, and 
finally a ladder, on which they ascend until out of sight, 
and then — come down again ! 

For whoever will work his way through the perplexities 
of their reasoning will find that the adherents of this school 
derive the value of pig-ii*on, for instance, or even of iron 
ore in the vein, from the willingness of consumers to pay 
for higher and more elaborate products into the produc- 
tion of which iron enters, deriving that willingness from 
a mental estimate on the part of consumers of the utility 
of these products to them. Thus, as coolly as such stories 
of Indian jugglers ignore the law of gravitation, do they 
ignore that law which to political economy is what gravi- 
tation is to physics, the law that men seek to satisfy their 
desires with the least exertion— a law from which proceeds 
the universal fact that as a matter of exchange no one will 
pay more for anything than he is obliged to. 

These elaborate attempts to link value on utility, and 
utility on individual will or perception, in order to find a 
support for the idea of value, only show that there is no 
resting-place in the supposition that value proceeds from 
exchangeability, and can only be relative to other values. 
The plausibility of this supposition comes from confusion 
in the use of a simple word. 

Of all words in common use in the English tongue the 
word '' thing " is the widest. It includes whatever may be 
an object of thought— an atom or a universe ; a fact or a 
fancy; y/hat comes into consciousness through our senses 
and what constitutes the peopling and furniture of our 



238 THE NATURE OF WEALTH. BooTcIL 

dreams; that which analysis cannot further resolve and 
that which has no other coherence than a verbal habit or 
mistake. But this comprehensiveness of the word we are 
sometimes apt to forget, or not fully to keep in mind, and 
to use such phrases as "all things" or "anything" when 
we really have in mind only things of one particular kind. 
When we wish to test the proposition that value is a 
relation of exchangeability between valuable things, v/e 
usually proceed to make a mental experiment with some 
few valuable things, for it would be impossible to take 
them all, and tiresome to attempt it. For the things se- 
lected for this experiment we are apt, as examination and 
observation will show, and as is evident in the writings of 
economists, to take such things as are most widely known 
and commonly exchanged, turning the particular into the 
general when required, by the formula, expressed or im- 
plied, "and other valuable things." Thus, for instance, 
we think of money, or as the most widely known repre- 
sentative of money, a piece of gold, and say to ourselves : 
" Here is a piece of gold. Why is it valuable ? It is that 
it can be exchanged for wheat, hardware, cotton goods and 
other valuable things. If it could not be so exchanged it 
would have no value, and the measure of its value is the 
value of the wheat, hardware, cotton goods and other val- 
uable things for which it is exchangeable. If the relation 
of exchangeability alters so that for the same piece of gold 
one can obtain more wheat, hardware, cotton goods and 
other valuable things, the value of the gold rises, and that 
of the other valuable things falls. If the relation of ex- 
changeability alters so that the piece of gold will exchange 
for less of these things, the value of the gold falls and that 
of the other things rises." Then, we reverse the standpoint 
of examination, taking in turn wheat, hardware or cotton 
goods, as representative of a particular instance of value, 
and gold, as representing other valuable things ; and seeing 



Chap. XII. VALUE IN EXCHANGE AND LABOR. 239 

that their value depends upon their exchangeable relation 
in the same way as that of gold in our first experiment, 
we conclude that value is indeed a relation of exchange- 
ability, and that that is the beginning and end of it. 

Thus, that value depends on value, and springs from 
value and can only be measured by value— that is, by the 
selection of some particular article having value, from 
which relative^ and empii'icaUy the value of other articles 
may be measured— seems to us perfectly clear, and we 
accept the doctrine that there can be no general increase 
or decrease in values, as if it were but another statement 
of the axiom that a whole is equal to the sum of its parts, 
and consequently that all those parts can never be increased 
or diminished at the same time. The habitual use of money 
as a common measure of value is apt to prevent any reali- 
zation of the fact that we are reasoning in a circle. 

I think I have correctly described the line of reasoning 
which makes the derivation of value from exchangeability 
so plausible. I do not of course mean to say that labor is 
never taken into account. It is often expressly mentioned 
and always implied to be one of the valuable things in the 
category of valuable or exchangeable things. But the 
weight of the examination is, I think, always thrown upon 
such things as I have named— things resulting from the 
exertion of labor ; while labor itself is passed over lightly 
as one of the '' other valuable things," and attention never 
rests upon it. 

And, furthermore, I am incKned to think that there 
always lurks in this examination — which is in reality an 
examination of the relative value of products of labor — 
the tacit assumption that the quantity of the valuable 
things (thought of as products of labor) existing at the 
specific moment presumed in the examination is a fixed 
quantit}?", so that there can be no exchange between those 
possessed of valuable things (i.e., products of labor) and 



240 THE NATURE OF WEALTH. Booh 11. 

those possessed of no valuable things {i.e., no products of 
labor). This, I think, is the case even where there is an 
assumption of giving the value of labor a place in the 
category of considered values, for what the reputed econ- 
omists since Smith have called the "value of labor" is in 
reality the value of the products of labor paid to laborers 
in wages, which has been usually assumed to come from a 
(at any given moment) fixed quantity, capital. And on 
another side, any rigorous examination of the nature of 
value has been prevented by the universal disposition of 
economists, not really questioned until "Progress and 
Poverty" was published, to slur over the nature of the 
value of land, and practically to assume, what was indeed 
the common assumption, that it was of the same origin as 
the value attaching to such things as gold, wheat, hard- 
ware, cotton goods or similar products of labor. 

That it ta.kes two to make an exchange, as certainly as 
" it takes two to make a quarrel," is clear. But that value 
in one person's hands does not, as is impliedly or expressly 
taught in economic works, necessarily involve the existence 
of value in the hands of others, may be seen by another 
imaginative experiment : 

Let us imagine some remote and as yet undiscovered 
island, where men still live as in the Biblical account our 
first parents lived before the Fall, taking their food from 
never-failing trees, quenching their thirst from ample and 
convenient springs, sleeping in the balmy air, and without 
thought of clothing, even of aprons of fig-leaves. The 
power of exerting labor they would of course possess, as 
Adam and Eve possessed it from the first; but of that 
exertion itself and of the toil it involves, we may imagine 
them as ignorant as Adam and Eve in their first estate are 
supposed to have been. On that island there would clearly 
be no value. Yet if valuable articles were brought there, 
Avould they necessarily lose their value? Could they be 



Chcqj.XII. VALUE IN EXCHANGE AND LABOR. 241 

parted with only by gift, and would there be no possibility 
of exchanging them ? 

Imagine, now, a ship containing snch merchandise as 
would tempt the fancy of a primitive people to come in 
sight of the island and cast anchor. Would exchange 
between the ship's people and the islanders be impossible 
because of the lack on the part of the islanders of anything 
having value? By no means. If nothing else would 
suffice, the offer of bright cloths and looking-glasses would 
surely tempt the Eves, if it did not the Adams ; and though 
never exerted before, the islanders would exert their power 
of labor to fill the ship with fruit or nuts or shells, or 
whatever else of the natural products of the island their 
exertion could procure, or to pull her on the beach so that 
she might be calked, or to fiU and roll her water-casks. 
There was nothing of value in the island before the ship 
came. Yet the exchanges that would thus take place would 
be the giving of value in return for value ; for on the part 
of the islanders value that did not exist before would be 
brought into existence by the conversion of their labor 
power through exertion into wealth or services. There 
would thus be what so many of our economists say is im- 
possible, a general increase of values. Even if we suppose 
the islanders to relapse into their former easy way of living 
when their visitors sailed off, there would still remain on 
the island, where there was no value before, some things 
having value, and this value would attach to these things 
until they were destroyed or so long as such desire as 
would prompt any of the islanders to render labor in 
exchange for them remained. On the other side, the value 
that the ship would carry off would certainly be not less 
than the value she contained on arrival, and in aU proba- 
bility would be much more. 

Now the way thus illustrated is the way in which the 
value that attaches to the greater number of valuable 



242 THE NATUEE OF WEALTH. Bool II. 

things originates. I do not mean merely to say that this 
was the way of the fii"st appearance of value among men, 
but that it is the way in which the value that attaches to 
what are properly articles of wealth notv originates. I do 
not mean merely to say, as Adam Smith said, that it was 
" by labor that all the wealth of the world ivas originally 
purchased." I mean to say that it is by labor that it is lioiv 
purchased. 

Nothing, indeed, can be clearer than this. Even in the 
richest of civilized countries, the ultimate purchasers of 
the greater mass of valuable things, are not those who have 
in store valuable things that they can give in exchange. 
The great body of the people in any civilized society con- 
sist of what we call the working-class, who live almost 
literally from hand to mouth, and who have in their pos- 
session at any one time little, or practically nothing, of 
value. Yet they are the purchasers of the great body of 
articles of value. Where does the value which they thus 
exchange for value which is already in concrete form come 
from ? Does it not come from the conversion of their labor 
power, through exertion, into value "? Is not the exchange 
which is constantly going on, the exchange of the potenti- 
ality of labor, or rem labor power for labor power that by 
that transfer has already been converted into value ? In 
common phrase, they exchange their labor for commodities. 

How does this fact— the fact that the great body of val- 
uable things pass into the hands of those who have no 
value to give for them except as they make valuable what 
before had no value, and are consumed, by being eaten, 
drunk, burned up or worn out, by them — consort with the 
theory that value is a relation of exchangeability between 
valuable things, and that there can be no general increase 
or decrease of values ? Does it not utterly invalidate the 
theory? Must there not be a constant increase of value 
to make up for the constant destruction of value, and in 



Cliap.XII. VALUE IN EXCHANGE AND LABOR. 243 

spite of it, to permit such growth of aggregate vahies as 
we see going on in progressive countries ? And in times 
when the ability to convert labor into values is checked by 
what we call ''want of employment" and great numbers 
of workers are idle, is there not a clear lessening of the 
sum of values, a general decrease in values, as compared 
with the times when there is what we call " abundance of 
employment," and the great majority of them are at work, 
turning labor power through exertion into value ? 

The truth is that current theories of value have resulted 
from the efforts of intelligent men to mold into a sem- 
blance of coherency teachings built upon fundamental 
incoherencies. Let me point out what gives them plausi- 
bility, the fallacy involved in the inclusion of labor as an 
" other valuable thing," while the real stress of the exami- 
nation is laid upon the relative values of such things as 
gold, wheat, hardware and cotton goods— things that are 
products of labor. It is a fallacy which our habit of 
speaking of the buying and selling and exchanging of 
labor, and our habit of thinking of the value of labor as 
we think of the value of gold or wheat or hardware or 
cotton goods, conceals from attention, but which is in 
reality a fallacy of the kind named by the old logicians 
" the fallacy of undistributed middle." 

Here we come to another instance of the care needed in 
political economy in the use of words. By the word 
"labor" we sometimes mean the power of laboring — as 
when we speak of the exertion of labor, or of labor being 
employed, or of labor being idle or wasting. Sometimes 
we mean the act of laboring— as when we speak of the 
irksomeness or toil of labor, or of the results or products 
of labor. Sometimes we mean the results of laboring— 
as is the case in most or all of the instances in which 
we speak of buying, selling or exchanging labor — the 
real tiling bought, sold or exchanged being the results of 



244 THE NATURE OF WEALTH. Bool 11. 

laboring, that is to say, wealth or services. And sometimes, 
again, we mean the persons who do labor or the persons 
who have the power and the willingness to labor. 

It is clear that labor in the first-mentioned sense of the 
word, that of the power or abUity of laboring, is not an 
exchangeable thing and cannot come into any category of 
values. It resides in the individual body and cannot be 
taken out of that body and transferred to another, any 
more than can sight or hearing, or wisdom or courage or 
skill. I may avail myself of another's skill, courage or 
wisdom, of his hearing or of his sight, by getting him to 
exert them for my benefit. And so I may avail myself of 
another's ability to labor by getting him to do me services, 
or to produce things which I am to own.. But the power 
of laboring he cannot give, nor I receive. While there 
are results of its expenditure that may be transferred, 
the power itself is intransferable, and therefore unex- 
changeable. 

Now the failure to keep in mind these different senses 
of the word labor, the failure to distribute the term, as 
the logicians would sa}^, operates to shut off inquiry as to 
whether the cause of value is not to be found in labor. 
For since in some senses labor is thought of as having 
value in exchange, the term, without distinction as to its 
various senses, is apt to pass in our minds into the category 
of exchangeable things, with gold or wheat or hardware or 
cotton goods, or ''other products of labor; " and thus the 
question is unconsciously begged. 

But, when we realize that, in whatever other sense of the 
word we may say that labor is a valuable thing, we must 
carefully exclude the sense of labor power, or ability to 
labor, a confusion is cleared up which has made the search 
for the true nature of what we call value in exchange a 
fruitless " swinging round a circle." For since value does 
not exist in labor power, but does appear where that power 



Chap. XII. VALUE IN EXCHANGE AND LABOR. 245 

takes tangible form through exertion, the fundamental 
relation of value must be a relation to exertion. 

But a relation to exertion in what sense? A rela- 
tion to exertion positively, or a relation to exertion nega- 
tively ? 

I exchange gold for silver, let us say. In this I give 
something positively and receive something positively. I 
get rid of gold and acquire silver. The other party to the 
exchange gets rid of silver and acquires gold. But when 
I exchange gold for exertion or toil, do I get rid of gold 
and acquire toil, and does he get rid of toil and acquire 
gold f Clearly not. No one wants exertion or toil ; all of 
us want to get rid of it. It is not exertion in a positive 
sense which is the object of exchange, but exertion in a 
negative sense ; not exertion given or imposed, but exer- 
tion avoided or saved; or, to use the algebraic form, the 
relation of the quality of value is not to plus-exertion, but 
to minus-exertion. Value, in short, is equivalent to the 
saving of exertion or toil, and the value of anything is the 
amount of toil which the possession of that thing will save 
the possessor, or enable him, to use Adam Smith's phrase, 
" to impose upon other people," through exchange. Thus, 
it is not exchangeability that gives value ; but value that 
gives exchangeability. For since it is only by exertion 
that human desires can be satisfied (those cravings or im- 
pulses that can be satisfied without exertion not rising to 
the point of desire) whatever will dispense its owner from 
the toil and trouble of exertion in the satisfaction of desire 
in that acquires exchangeability. 

Let me put the proposition in another form : 

The current theory is that it is when and because a thing 
becomes exchangeable that it becomes valuable. My con- 
tention is that the truth is just the reverse of this, and 
it is when and because a thing becomes valuable that it 
becomes exchangeable. 



246 THE NATURE OF WEALTH. Booh 11. 

It is not the toil and trouble which a thing has cost that 
gives it value. It may have cost much and yet be worth 
nothing. It may have cost nothing and yet be worth 
much. It is the toil and trouble that others are now 
willing, directly or indirectly, to relieve the owner of, in 
exchange for the thing, by giving him the advantage of 
the results of exertion, while dispensing him of the toil 
and trouble that are the necessary accompaniments of 
exertion. Whether I have obtained a diamond, for 
instance, by years of hard toil or by merely stooping to 
pick it up— a movement which can hardly be called an 
exertion, since it is in itself but a gratification of curiosity 
which does not involve irksomeness — has nothing what- 
ever to do with its value. That depends upon the amount 
of toil and trouble that others will undergo for my benefit 
in exchange for it ; or what amounts to the same thing, 
which they will dispense me of in the satisfaction of my 
desire, by giving me things in exchange, for which others 
will undergo toil and trouble. 

That which may be had without the toil and trouble of 
exertion has no value. That for which the desire to pos- 
sess is not strong enough to prompt to the toil and trouble 
of exertion has likewise no value. But everything having 
value, has that value only when, where and to the degree 
that its possession will, without exertion on the part of its 
possessor, satisfy through exchange a desire that prompts 
to exertion. 

In other words, the value of a thing is the amount of 
laboring or work that its possession will save to the 
possessor. 

Desire itself, which is the prompter to exertion, cannot 
be measured, as the most recent school of pseudo-econo- 
mists attempt vainly to measure it. It is a quality or 
affection of the will or individual Ego, which, being in its 
nature subjective, can have no objective measurement 



Cliaxy.XII. VALUE IN EXCHANGE AND LABOE. 247 

until it passes through action into the field of objective 
existence. Even in the individual it is not a fixed quality 
or affection, but resembles more the illumination produced 
by a movable search-light, which, as it brings one object 
iu the landscape into focus, throws another into shade. 
All that we can say of it is that it has a certain scale or 
order of appearance, so that when the more primitive 
desires that we call '' wants " or " needs " slumber in sat- 
isfaction, other desires appear ; or as they are enkindled 
again, these others disappear. 

But desire impels to action, as what we call energy or 
force impels to movement. And while we can no more 
measure desire in itself than we can measure force in itself, 
we can measure it in the same way that we measure energy 
or force— by the resistance it will overcome. Now, while 
the resistance to movement is inertia— probably resolvable 
into gravitation and chemical affinities ; so the resistance 
to the gratification of desire is the toil and trouble of exer- 
tion. It is this that is expressed by and measured in 
values. 

To repeat : Since the desire for material satisfactions is 
universal among men, and the only way in which these 
satisfactions can be obtained from Nature is by exertion, 
which men always seek to avoid, whatever will satisfy de- 
sire without calling for exertion is for that reason desired 
of itself, not for its own uses, but because it affords the 
means of gratifying other desires, and thus becomes 
exchangeable whenever the existence of others than its 
owner makes exchange possible. Normally, at least, value 
and exchangeability are thus always associated and seem- 
ingly identical. But in the causal relationship, value 
comes first. That is to say, it is not true, as economists 
since the time of Adam Smith have erroneously taught, 
that a thing is valuable because it is exchangeable. On 
the contrary, it is exchangeable because it is valuable. Ex- 



248 THE NATUEE OF WEALTH. BooTcII. 

change is in fact the mutual transfer of value. Of all 
other qualities of things, value is the only quality of which 
exchange takes note. 

A little use of imaginative experiment will make it clear 
that what we call value in exchange is in reality not depen- 
dent on exchangeabilitj^, but may exist when exchange is 
impossible. 

A Robinson Crusoe during his period of isolation could 
make no exchanges, for there was no one with whom he 
could exchange, and it was only the hope of being some- 
time discovered and reheved that could have prompted him 
to take his pieces of eight ashore. Yet, as this hope faded 
it is not true that his estimate of the different things he 
possessed would be entirely based on their utility to him, 
and that he would have no sense of the relation which we 
call value in exchange. Even if the hope of being some- 
time relieved had entirely disappeared from his thought, 
something essentially the same as value in exchange would 
be brought out in his mind by any question of getting or 
saving one of two or more things. Of several things to 
him equally useful, which he might find in the wreck of his 
ship or on the shore line under conditions which would 
enable him to secure but one ; or of several equally useful 
to him, which were threatened by a deluge of rain or an 
incursion of savages, it is evident that he would " set the 
most store by" that which would represent to hmi the 
greatest effort to replace. Thus, in a tropical island his 
valuation of a quantity of flour, which he could replace only 
by cultivating, gathering and pounding the grain, would 
be much greater than that of an equal quantity of bananas, 
which he might replace at the cost of plucking and carry- 
ing them ; but on a more northern island this estimate of 
relative value might be reversed. 

And so all things which to get or retain would require 
of him toil would come to assume in his mind a relation 



Chap.XII. VALUE IN EXCHANGE AND LABOR. 249 

of value distinct from and independent of their usefulness, 
a relation based on the greater or less degree of exertion 
that their possession would enable him to avoid in the 
gratification of his desii'es. 

It is this relation which Kes at the bottom of value in 
the economic sense, or value in exchange. In the last 
analysis value is but an expression of exertion avoided. 

To sum up : 

Value in exchange, or value in the economic sense, is 
worth in exertion. It is a quality attaching to the owner- 
ship of things, of dispensing with the exertion necessary 
to secure the satisfaction of desire, by inducing others to 
take it. Things are valuable in proportion to the amount 
of exertion which they will command in exchange, and 
will exchange with each other in that proportion. 

The value of a thing in any given time and place is the 
largest amount of exertion that any one will render in 
exchange for it. But as men always seek to gratify their 
desu'es with the least exertion, this is the lowest amount 
for which a similar thing can otherwise be obtained. 

But while value means always the same quality— that 
of dispensing with exertion in the satisfaction of desire 
—yet there are various sources from which this quality 
originates. These may be broadly divided into two — that 
which originates in the toil and trouble involved in pro- 
duction, and that which originates in obligation to undergo 
toil and trouble for the benefit of another. The failure to 
note this difference in the sources of value is the cause of 
great perplexity. 



CHAPTER XIII. 
THE DENOMINATOR OF VALUE. 

SHOWING WHAT VALUE IS, AND ITS RELATIONS. 

What value is— The test of real value— Value related only to human 
desire — This perception at the bottom of the Austrian school — 
But its measure must be objective— How cost of production acts 
as a measure of value— Desire for similar things and for essential 
things— Application of this principle— Its relation to land values. 

yALUE in the economic sense or value in exchange is, 
as we have seen, worth in exchange. It is a quality 
attaching to the ownership of things, of dispensing with 
the exertion necessary to secure the satisfaction of desire, 
by inducing others to take it in return for them. Things 
are valuable in proportion to the amount of exertion that 
they will thus command, and will exchange with each other 
in that proportion. 

The value of a thing in any time and place is thus the 
largest amount of exertion that any one wUl render in 
exchange for it. And since men always seek to gratify 
their desires with the least exertion this is, or always tends 
to be, the lowest amount for which such a thing can other- 
wise be obtained. 

This of course is not to say that whatever anything may 
exchange for is its value. In individual and especially in 
unaccustomed transactions the point at which any par- 
ticular exchange takes place may considerably vary. But 

250 



Chap.XIII. THE DENOMINATOR OF VALUE. 251 

that our idea of value assumes a normal point, and what 
this point really is, may be seen in common speech. Thus 
we frequently say of the exchange of a certain thing that 
it brought less than its value, or that it brought more than 
its value. Now in this, which we refer to as a real or true 
value, differing from the assumption of value in the par- 
ticular exchange, we mean something more definite than 
customary or habitual value, for this, as in our times we 
know, is subject in regard to particular things to consider- 
able and not infrequent changes. What we really mean 
by this real value, and what is its true test, we show in the 
way we attempt to prove that a thing was exchanged at 
more or less than its value. We say that a thing was ex- 
changed at less than its value because some one else would 
have given more for it. Or that a thing was exchanged at 
more than its value because some one else would have given 
the same thing for a less return. And so what we deem 
the point of real value, or actual equivalence, we speak of 
as market value, from the old idea of the market or meet- 
ing place of those who wish to make excliPtUges, where 
competition or the higgling of the market brings out the 
highest bidding or the lowest offering in transactions of 
exchange. And when we wish to ascertain the exact value 
of a thing we offer it at auction or in some other way sub- 
ject it to competitive offers. 

Thus I am justified in saying that the value of a thing 
in any time and place is the largest amount of exertion 
that any one will render in exchange for it ; or to make 
the estimate from the other side, that it is the smallest 
amount of exertion for which any one will part with it in 
exchange. 

Value is thus an expression which, when used in its 
proper economic sense of value in exchange, has no direct 
relation to any intrinsic quality of external things, but 
only to man's desires. Its essential element is subjective, 



252 THE NATUEE OF WEALTH. BooTcII. 

not objective ; that is to say, lying in the mind or will of 
man, and not lying in the nature of things external to the 
human will or mind. There is no material test for value. 
Whether a thing is valuable or not valuable, or what may 
be the degree of its value, we cannot really tell by its size 
or shape or color or smell, or any other material quality, 
except so far as such investigations may enable us to infer 
how other men may regard them. For the point of equiva- 
lence or equation that we express or assume when we speak 
of the value of a thing is a point where the desire to obtain 
in one mind so counterbalances in its effect on action the 
desire to retain in another mind that the thing itself may 
pass in exchange from the possession of one man to the 
possession of another with mutual willingness. 

Now this fact that the perception of value springs from 
a feeling of man, and has not at bottom any relation to the 
external world— a fact that has been much ignored in the 
teachings and expositions of accepted economists — is what 
lies at the bottom of the grotesque confusions which, under 
the name of the Austrian school of political economy, have 
within recent years so easily captured the teachings of 
pretty much all the universities and colleges in the English- 
speaking world. 

Vaguely feeling that there was something wrong in the 
accepted theory of value, they have taken the truth that 
value is not a quality of things but an affection of the 
human mind towards things, and attempted at the risk of 
fatal consequences to the ancient landmarks of English 
speech to account for, classify and measure value through 
what is and ever must remain the subjective — that is to 
say, pertaining to the individual Ego. 

The fault of all this is that it begins at the wrong end. 
What is subjective is in itself incommunicable. A feel- 
ing so long as it remains merely a feeling can be known 
only to and can be measured only by him who feels it. 



Chap. XIII. THE DENOMINATOR OF VALUE. 253 

It must come out in some way into the objective tkrough 
action before any one else can appreciate or in any way 
measui'e it. Even if we ourselves may measure the strength 
of a desii'e while it is as yet merely felt, we can make no 
one else adequately understand it until it shows itself in 
action. 

Value has of course its origin in the feeling of desire. 
But the only measure of desire it can afford is akin to the 
rough and ready way of measuring sorrow which was pro- 
posed at a funeral by the man who said : '' I am sorry for 
the widow to the amount of five dollars. How much are 
the rest of you sorry?" Now, what value determines is 
not how much a thing is desired, but how much any one is 
willing to give for it ; not desire in itself, but what the 
elder economists have called effective demand— that is to 
say, the desire to possess, accompanied by the abihty and 
wUlingness to give in return. 

Thus it is that there is no measure of value among men 
save competition or the higgling of the market, a matter 
that might be worth the consideration of those amiable 
reformers who so lightly propose to abolish competition. 

It is never the amount of labor that has been exerted in 
bringing a thing into being that determines its value, but 
always the amount of labor that will be rendered in ex- 
change for it. Nevertheless, we properly speak of the value 
of certain things as being determined by the cost of pro- 
duction. But the cost of production that we thus refer to 
is not the expenditure of labor that has taken place in 
producing the identical thing, but the expenditure of labor 
that would now be required to produce a similar thing— 
not what the thing itself has cost, but what such a thing 
would now cost. 

The desire to obtain, which renders men willing to 
undergo exertion, is, save in rare cases, not the desire for 
an identical thing, but the desire for a similar thing. Thus, 



254 THE NATURE OF WEALTH. Book 11. 

a desire for wheat is not a desire for certain particular 
grains of wheat ; but a desire for wheat generally, or for 
wheat of a certain kind. So a desire for coats, or knives, 
or diinking-glasses or so on, is, save in very rare cases, not 
a desire for particular, identical things, but a desire for 
similar things. Now, the value of a thing in any given 
time and place is the largest amount of labor that any one 
will render (or cause others to render) in exchange for it. 
But as men always seek to gratify their desires with the 
least exertion, this highest amount of labor which any one 
will give for a similar thing in any time and place, tends 
always to be the lowest amount for which such a thing 
can in any other way be obtained. 

Thus the point of eqiiation between desire and satisfac- 
tion, or as we usually say, between demand and supply, 
tends in a case of things that can be produced by labor to 
the cost of production— that is to say, not what the pro- 
duction of the thing has cost, but the present cost of 
producing a similar thing. Desire remaining, whatever 
increases the amount of labor that must be expended to 
obtain similar things by making them will thus tend to 
increase the value of existing things ; and whatever tends 
to decrease the cost of obtaining similar things by making 
them will tend to decrease the value of existing things. 

But there are some cases in which the desire for a 
product of labor is not a desire for a similar thing, but 
for a particular and identical thing. Thus, when that 
great genius and great toady. Sir Walter Scott, carried 
off a wine-glass from which George IV. had drunk, it was 
to satisfy a desire not for a similar glass, but for that 
particular glass, v/hich had been honored by the lips of 
royalty. Where such a desire is felt by only one person 
or one economic unit, as where I or my family may value 
a chair or table or book which once belonged to some one 
we loved, our valuation is analogous to value in use, and 



Chap. XIII. THE DENOMINATOR OF VALUE. 255 

does not affect its economic or exchange value, except 
perhaps as it might make us loath to part with it at its 
true exchange value. But where more than one person 
or unit has this desii'e, which is the case where the posses- 
sion of a particular article comes to gratify ostentation, it 
acquires an exchange value which is not limited by the 
cost of producing a similar thing. Thus, an original 
picture of a dead master, or an original copy of an old 
edition of a book, which identically cannot now be produced 
by any amount of exertion, may have a value not limited 
by the cost of production, and this may rise to any height 
to which sentiment or ostentation may carry desire. 

The cases I have here taken to illustrate the principle 
have but small practical application, though they are con- 
tinually called to attention, and any theory of value must 
include them. But the principle itself has the widest and 
most important applications, which steadily increase in 
importance with the growth of civilization. The value that 
attaches to land with the growth of civihzation is an 
example of the same principle which governs in the case 
of a pictui'e by a Raphael or Rubens, or an Elgin marble. 
Land, which in the economic sense includes all the natural 
opportunities of life, has no cost of production. It was 
here before man came, and will be here, so far as we can 
see, after he has gone. It is not produced. It was created. 

And it was created and still exists in such abundance as 
even now far to exceed the disposition and power of man- 
kind to use it. Land as land, or land generally— the 
natui'al element necessary to human life and production — 
has no more value than air as air. But land in special, 
that is, land of a particular kind or in a particular locality, 
may have a value such as that which may attach to a par- 
ticular wine-glass or a particular picture or statue ; a value 
which unchecked by the possibility of production has no 
limit except the strength of the desire to possess it. 



256 THE NATURE OF WEALTH, Book II. 

This attaching of value to land in special— that is to say, 
land in particular localities with respect to population— 
is not merely a most striking featui-e in the progress of 
modern civilization, but it is, as I shall hereafter show, a 
consequence of civilization, lying entirely within the natu- 
ral order, and furnishing perhaps the most conclusive 
proof that the intent of that order is the equaUty of men. 
If left by just municipal laws to its natural development, 
the strength of the desire to use particular land can never 
become the desire to use land generally, and can never rise 
to the point of lowering wages by compelling workers to 
give for the use of land any part of what is the natui'al 
and just earnings of their labor. But where land is monop- 
olized and the resort of population to unmonopolized 
land is shut out either by legal restriction or social con- 
ditions, then the desire to use particular land may be based 
upon the desire to use land generally, or land the natural 
element ; and its strength, measured in the only way in 
which we can measure the strength of a desire, the willing- 
ness to undergo toil and trouble for its gratification, may 
become when pushed to full expression, nothing less than 
the strength of the desire for life itself, for land is the 
indispensable prerequisite to life, and " all that a man hath 
will he give for his life." 

But in every case the value of land, consisting in the 
amount of exertion that can be commanded from those 
who desire to use it by those who have the power of giving 
or refusing consent to its use, is in the nature of an obli- 
gation to render service rather than in that of an exchange 
of service. 



CHAPTER XIV. 
THE TWO SOURCES OF VALUE. 

SHOWING THAT THERE IS A VALUE FROM PRODUCTION AND 
ALSO A VALUE PROM OBLIGATION. 

Value does not involve increase of wealth— Value of obligation— Of 
enslavement— Economic definition of wealth impossible without 
recognition of this difference in value — Smith's confusion and 
results— Necessity of the distinction — Value from production and 
value from obligation— Either gives the essential quality of com- 
manding exertion— The obligation of debt— Other obligations- 
Land values most important of all forms of value from obligation 
— Property in land equivalent to property in men — Common mean- 
ing of value in exchange — Real relation with exertion — Ultimate 
exchangeability is for labor— Adam Smith right— Light thrown 
by this theory of value. 

WE now come to a point of much importance. For it 
is to the f aihire to note what I wish in this chapter 
to point out that the confusions that have so perplexed 
the terms value and wealth in the study of political 
economy have arisen. 

It is usually, if not indeed invariably assumed in all 
standard economic works that the conversion of labor 
power through exertion into services or wealth is the only 
way in which value originates. 

Yet what we have abeady seen is enough to show us 
that this cannot be so. 

It is not the exertion that a thing has cost, in past time, 
that gives it value, but the exertion that its possession will 

257 



258 THE NATUEE OF WEALTH. Book II. 

in future time dispense with, for even the immediate is in 
strictness future. Thus value may be created by mere 
agreement to render exertion, or by the imposition of such 
obstacles to the satisfaction of desire as will necessitate a 
greater exertion for the attainment of the satisfaction. In 
the same way, the value of some things may be increased, 
or sometime perhaps produced, without the production of 
real wealth ; or even by the destruction of real wealth. 

For instance: I with another may agree to exchange, 
but consummate in the present but one side of the full 
exchange, substituting for the other side an agreement or 
obligation to complete it in the future. That is to say, I 
may give or receive things having present value in return 
for an obligation to render labor or the results or repre- 
sentatives of labor at some definite or indefinite future 
time. Or, both of us may exchange similar obligations. 
The obligations thus created may, and frequently do, at 
once assume value and become exchangeable for exertion 
or the results of exertion. Or, a government or joint- stock 
company may issue obhgations of the same kind, in the 
form of bonds or stock, which may at once assume a value 
dependent as in the case of an individual upon the strength 
of the belief that the obligations will be faithfully re- 
deemed, irrespective of anj?- counter payment or obligation. 

There is in all this no increase of wealth ; but there is a 
creation of value— a value arising out of obligation and 
dependent entirely upon expectation, but still a value— an 
exchangeable quantity, the possession of which could com- 
mand through exchange other valuable things. 

Or, again : Suppose the discoverers of the Isle of Eden, 
we have imagined, to have been of the same kidney as the 
Spanish discoverers of America, and instead of tempting 
the islanders to work for them by exciting their desire for 
new satisfactions, had compelled them to work by whip- 
ping, or killing them if they refused. The discoverers 



Chajj.Xir. THE TWO SOURCES OP VALUE. 259 

might thus have carried off, as the Spanish conquistadors 
carried off, what readily, exchanging for exertion in other 
parts of tlie world, woidd there have great value— not 
merely precious metals or stones, woods or spices— but 
even the natives themselves. For carried to smy country 
where the power to compel them to work was by municipal 
law transferable, these human beings would have value, 
just as the ability to compel their service in their native 
island would have value. 

Now in Individual Economy, which takes cognizance 
only of the relations of the individual to other individuals, 
there is no difference between these two kinds of value. 
Whether an individual has the power of commanding- 
exertion from others because he has added to the general 
stock, or simply because he holds the power of demanding 
exertion from others makes no difference to him or to them. 
In either case he gets and they give. 

But in political economy, which is the economy of the 
Society or the aggregate, there is a great difference. Value 
of the one kind— the value which constitutes an addition 
to the common stock— involves an addition to the wealth 
of the community or aggregate, and thus is wealth in the 
politico-economic sense. Value of the other kind— the 
value which consists merely of the power of one individual 
to demand exertion from another individual— adds nothing 
to the common stock, all it effects is a new distribution 
of what already exists in the common stock, and in the 
politico-economic sense, is not wealth at all. 

In the development of political economy from Adam 
Smith these two and totally different kinds of values have 
been confused in one word. Smith started in by recog- 
nizing as value that which added to wealth, but he after- 
wards, and with seeming carelessness included as value that 
wliich adds to the wealth of the individual, but adds 
nothing whatever to the wealth of the community. This 



260 THE NATURE OF "WEALTH. Boole 11. 

consorted with tlie common idea that the wealth of a com- 
munity is the sum of tlie wealth of individuals, and enabled 
all that has value to the individual to be included as po- 
litico-economic wealth. It consorted as wealth with the 
disposition of the wealthy class to give a moral sanction 
to whatever was to them superiority, and has thus been 
perpetuated by economist after economist. 

But it was impossible to treat as one and the same 
quality a value that added to the wealth of the communit}^ 
and a value that did not, and yet to make a pohtico-eco- 
nomic definition of wealth. This therefore has been the 
point on which the political economy founded by Adam 
Smith has been constantly at sea. It could not be a 
political economy until it had defined wealth, and it 
could not define wealth until it had recognized a distinction 
between two kinds of value. 

This difficulty might have been avoided in the beginning 
by giving to the two kinds of value separate names, but 
the word value has so long been used for both, that the 
best a science of political economy can do now, is to dis- 
tinguish between value of the one kind and value of the 
other kind. 

This however it is necessary to attempt. The best thing 
I can do is to distinguish value, not as one, but as of two 
kinds. 

By a clear distinction, the various ways in which value 
may originate, embrace (1) the value which comes from 
the exertion of labor in such a way as to save future exer- 
tion in obtaining the satisfaction of desire ; and, (2) the 
value which comes from the acquisition of power on the 
part of some men to command or compel exertion on the 
part of others, or, which is the same thing, from the im- 
position of obstacles to the satisfaction of desire that 
render more exertion necessary to the production of the 
same satisfaction. 



Cliap.Xir. THE TWO SOUECES OF VALUE. 261 

Value arising in the first mode may be distinguislied. as 
" value from production," and value arising in the second 
mode may be distinguislied as ''value from obligation" — 
for the word obligation is the best word I can think of 
to express everything which may require the rendering 
of exertion without the return of exertion. 

Value in the sense of exchange value, the only sense in 
which it can be properly used in pohtical economy, since 
this has now been fixed by usage, is one and the same 
quality, just as the water that flows through the outlet of 
the Nile or Mississippi is one and the same stream. But 
as we distinguish the sources of these waters as the White 
Nile and the Blue Nile, or as the Upper Mississippi, the 
Missoui'i, the Ohio, etc., so we may distinguish as to origin, 
between value from production and value from obligation. 
The mere recognition that there is such a difference in the 
origins of value would of itself do much to extricate po- 
litical economy from the utter maze into which a century 
of culti^^ation has brought it in the closing years of the 
nineteenth century. 

But while making this distinction it must be remembered 
that the essential character of value is always that of equiva- 
lence to exertion in the satisfaction of desire. The value of 
a thing, in short, is the amount of toil and trouble which it 
will save to the possessor (as in the case of a Crusoe), or 
(as is the usual case) others may be willing to undertake in 
exchange for it. This is not necessarily the toil and trouble 
which the purchaser will agree in his own person to undergo, 
but the toil and trouble which he had power to command 
or to induce others to undergo, and of which he can thus 
dispense the seller in the attainment of his desire. No 
matter how this quality attaches to them, whether by value 
from production, or by value from obligation, things have 
value when, so long, and so far, as they will pui'chase ex- 
emption from toil and trouble in the attainment of desire. 



262 THE NATUEE OF WEALTH. BoolcIL 

That ''debt is slavery" is not merely a metapliorical 
expression. It is literally true in this, that debt involves, 
though it may be in limited degree, the same obligation of 
rendering exertion without return as does slavery. When 
under the form of exchange I receive services or commod- 
ities from another, asking him to forego the receipt on his 
part of what I should by the terms, expressed or implied, 
of our exchange, receive in return from him, I assume an 
obligation, though probably to a limited extent and with 
limited sanctions, to render to him labor, or the results of 
labor, without, so far as it goes, any return on his part. 
Such a debt may be a mere debt of conscience, which he 
may have no means of proving, or have no legal means of 
collecting, even if he could prove it ; or it may be a mere 
debt of honor, which is the name we give to debt held 
morally binding, but which the municipal law may refuse 
to help us to collect ; or it may be witnessed by other per- 
sons or writings, or by the assignment of releases of specific 
things as in mortgages ; or by the agreements of others to 
pay if I do not, as is the case of negotiable notes. But 
while all this may affect the ease with which I may dispose 
of my obligation to another and the value I can get in re- 
turn for it, the essential principle of these different forms 
of obligation is the same. It is the same in so far as it 
goes as the obligation to render exertion, as that which 
gave their exchangeable value to slaves, and which is in 
fact the type of all debts of obligation. 

The term " value from obligation " will at once be recog- 
nized as including an immense body of the values dealt 
with by banks, stock exchanges, trust companies, or held 
by private indi\dduals, and which are commonly known as 
obligations or securities. But it may require a little re- 
flection to see how much else there is having value which 
is really value from obligation. All debts and claims of 
whatever kind, whether they be what the lawyers call 



Chap. XIV. THE TWO SOURCES OP VALUE. 263 

choses in action or mere debts of honor or good faith un- 
recognized by law, all special privileges and franchises, 
patents, and the beneficial interests known as good-wOl, in 
so far as they have value, have it as value from obligation. 
The value of slaves wherever slavery exists — and only a few 
years ago the market value of slaves in the United States 
was estimated in round numbers at three thousand million 
dollars— is clearly a value of obligation, springing not from 
production, but from the obligation imposed on the slave 
to work for the master. So too with the value of public 
pensions and the incumbency of profitable offices and 
places, when they are made matters of bargain and sale, 
which is in some cases yet done in England and which is 
I fear to a still larger extent yet done in the United States, 
though surreptitiously, as it is habitually done in China 
where " civil service reform " has for centuries prevailed. 

In English newspapers one may yet occasionally read 
advertisements for the sale of advowsons for the cure of 
souls. The exchange value that they have is of course 
from obligation. Up to a few years ago there were similar 
advertisements for the sale of commissions in the army 
and navy. These are but survivals of an earlier and per- 
haps clearer type of nomenclature. The value they have 
is clearly a value from obligation. And the same thing is 
true under more modern forms, of rights given by protec- 
tive duties, by civil-service regulations, and franchises, and 
patents, and forms of good-will. All these things have 
value only as " value from obligation." 

Among the valuable assessments of the large landholders 
of feudal times was the right of holding markets, of keep- 
ing dove-cotes, of succeeding in certain instances to the 
property of tenants; or of grinding grain, of coining 
money, of collecting floatwood, etc. The values of these 
were clearly '' values from obligation." But that they have 
passed insensibly into the single right of exacting a rent 



264 THE NATURE OF WEALTH. Book 11. 

for the use of land is proof that the value of this right — 
the right, as it is called, of private ownership of land— is 
in reality a " value from obligation." 

These ways of giving an additional value to things al- 
ready in existence or of bringing outvalue in things which 
may have no more tangible existence than an act of mind, 
a verbal promise, a paper note, an act of legislature, a de- 
cision of court or a common habit or custom, are clearly 
of totally different origin and natui-e from the ways in 
which value originates by the expenditure of labor in the 
production of wealth or services, and readily to distinguish 
them we need a classifying name. It is because the word 
obligation best consorts with existing customs, and best 
expresses the common character of the element distinct 
from production that gives value, that I speak of value 
from obligation as distinct from value from production. 
For the common character of all that I am here speaking 
of is that their possession enables the possessor to com- 
mand or compel others to render exertion without any 
return of exertion on his part to them. This power to 
command labor without the return of labor constitutes on 
the other side an obligation, and it is this that gives value. 

Thus a verbal promise, a bank-account, a promissory 
note, or any other instrument of indebtedness, an annuity, 
an insurance pohey, things which frequently have value, 
derive that value from the fact that they express an obli- 
gation fixed, unfixed or merely contingent to render exer- 
tion to the holder or assignee without return. Thus value 
may be increased sometimes even by the destruction of 
valuable things, as the Dutch East India Company kept 
up the value of spices in Europe by destroying great 
quantities of spices in the islands where they grew; and 
as our " protective " tariff makes certain things more valu- 
able in the United States than thej^ would otherwise be, 
by imposing fines and penalties on bringing them into the 



Chap. XIV. THE TWO SOURCES OF VALUE. 265 

country ; or as strikes, as we have recently seen in Aus- 
tralia, in England and in America, may increase the value 
of coal or other products ; or as a drought, which causes 
great loss of the corn crop over wide areas, may increase 
the value of corn, or as a war which lessens the supply of 
cotton in England may increase the value of cotton there. 

All such additions to value are of " value from obliga- 
tion," which can no more affect the general stock than can 
what Jack wins from Tom in a game of cards. 

But the most important of these additions to value 
which do not increase wealth are unquestionably to be 
found in land value, the form of value from obligation 
which in the progress of mankind to civilization tends 
most rapidly to increase, and which has already in the 
modern world assumed perhaps more than the relative 
importance that slavery once held in the ancient world. 
In an England or a United States, or any other highly 
civilized country, this importance is already so great that 
the selling value of the land is the selhng value of all im- 
provements and personal property, in short of all "value 
from production;" while it is the one thing which the 
natural progress of society, in short all improvements of 
whatever kind, tend constantly to augment. Yet this 
value is not a part of wealth in the economic sense. It 
can have, so far as the individual is concerned, none of 
the moral sanctions of property. It rightfully belongs to 
no individual or individuals but to the community itself. 
Considered by the vulgar as the highest form and very 
type of wealth, land in reality is to the political economist 
not wealth at all. 

And this is the reason that neither by Adam Smith nor 
by those who succeeded him, however much they may have 
differed as to tweedledum and tweedledee, has the true 
character and dual nature of value been realized. For to 
recognize that is to come to the conclusion of the Physio- 



266 THE NATURE OF Y/EALTH. BooTcIL 

crats that, in the economic sense, land is not wealth. And 
this involves a revolution, albeit to society a beneficent 
revolution, greater than the world has yet seen. 

Yet it is perfectly clear. Let us go back in thought to 
our imaginary Isle of Eden, and suppose that its dis- 
coverers, instead of making merchandise of the inhabitants 
themselves, had done at once what the American mission- 
aries have done gradually in the Hawaiian Islands— made 
themselves owners of the land of the island, and A\dth 
power to enforce their claim by punishment, had forbidden 
any islander to pluck of a tree or drink of a spring with- 
out their permission. Land before valueless would at once 
become valuable, for the islanders having nothing else to 
give would be compelled to render exertion, or the prod- 
ucts of exertion, for the privilege of continuing in life. 

And that this quality attaching to things, of purchasing 
by exchange exemption from the toil and trouble in the 
attainment of desire, is what is commonly meant by value 
in exchange a little analysis wiU show. " The value of a 
thing is just what you can get for it," is a saying, current 
among men who have never bothered their heads with po- 
litical economy, which concisely expresses the conception 
of value. A thing has no value for which nothing can be 
got in exchange, and it has value when, so long as, and to 
the degree that, it may be exchanged for some other thing 
or things. 

But all things having value cannot be exchanged for 
all other things having value. I could not, for instance, 
exchange a million dollars' worth of cheese-cakes for a 
building worth a million dollars. What then is the one 
thing for which all things having value must directly or 
indirectly exchange ? We are apt to ignore that question, 
because we habitually think of value in terms of money, 
which serves us as a flux for the exchange of all values, 
and because we are apt to think of labor as a valuable 



Chap. XIV. THE TWO SOURCES OF VALUE. 2G7 

thing, without distinguishing the different senses in which 
we use the word. But if we press the question, we see 
that everything having vakie must be ultimately exchange 
able into human exertion, and that it is in this that its 
value consists. There are some valuable things that cannot 
readily, and some that it is practically impossible to ex- 
change for exertion— such, for instance, as an equatorial 
telescope, a locomotive, a steamship, a promissory note or 
bond of large amount, or a bank-note or greenback of high 
denomination. But they derive their value from the fact 
that they can be exchanged for things that can in turn be 
exchanged for exertion. 

Money itself derives its power of serving as a medium 
or flux of exchanges from the fact that it is of all things 
that which is most readily exchangeable for exertion, and 
it utterly loses value when it ceases to be exchangeable for 
exertion. This we have seen in the United States in the 
case of the Continental currency, in the case of the notes 
of broken State banks and in the case of the Confederate 
currency. Thus value ends as it begins, vidth the power 
of commanding exertion, and is always measui-ed by that 
power. 

Again, as before, we find that Adam Smith was right in 
the clear though evanescent gleam that he got of the nature 
of value. Value in the economic sense is not a mere rela- 
tion of exchangeability between valuable things, which, 
save relatively, as between one particular thing and an- 
other particular thing, can neither increase nor diminish. 
The real relation of value is with human exertion, or rather 
with the toil and trouble that are the inseparable adjuncts 
of exertion ; and the true and absolute value of anything, 
that which makes it comparable with that of any or all 
other things in all times and places, is the difficulty or ease 
of acquiring it. That is of high value which is hard to 
get ; that is of low value which is easy to get ; while that 



268 THE NATUEE OF WEALTH. Booh It. 

which may be had without exertion and that which no one 
will undergo exertion to get are of no value at all. Cheap- 
ness or low value is the result of abundance ; dearness or 
high value the result of scarcity. The one means that the 
satisfactions of desire may be obtained with little effort, 
the other that they can be obtained only with much effort. 
Thus there may be general increase or decrease of value as 
clearly and as truly as there may be general scarcity or 
general abundance. 

The recognition of this simple theory of value will enable 
us as we proceed to clear up with ease and certainty many 
points which have perplexed the economists who have 
ignored it, and are to their students stumbling-blocks, 
which make them doubt whether any real science of 
political economy is possible. In its light all the complex 
phenomena of value and exchange become clear, and are 
seen to be but illustrations of that fundamental law of 
the human mind which impels men to seek the gratifica- 
tion of their desires with the least exertion. 

Whatever increases the obstacles, natural or artificial, 
to the gratification of desire on the part of the ultimate 
users or consumers of things, thus compelling them to ex- 
pend more exertion or undergo more toil and trouble to 
obtain those things, increases their value ; whatever lessens 
the exertion that must be expended or the toil and trouble 
that must be undergone, decreases value. Thus, wars, 
tariffs, pirates, public insecurity, monopolies, taxes and 
restrictions of all kinds, which render more difficult the 
satisfaction of the desire for certain things, increase their 
value, and discoveries, inventions and improvements which 
lessen the exertion required for bringing things to the 
satisfaction of desire, lessen their value. 

Here we may see at once the clear solution of a ques- 
tion which has perplexed and stiU perplexes many minds 
—the question whether the artificial increase of values by 



Chaji.XIV. THE TWO SOURCES OF VALUE. 269 

governmental restriction is or is not in the interest of the 
community. When we regard value as a simple relation 
of exchangeability between exchangeable things, there may 
seem room for debate. But when we see that its relation 
is to the toil and trouble which must be undergone by ulti- 
mate users in the satisfaction of desire, there is no room 
for debate. Scarcity may be at times to the relative in- 
terest of the few ; but abundance is always to the general 
interest. 



CHAPTER XV. 

THE MEANING OF WEALTH IN POLITICAL 
ECONOMY. 

SHOWING HOW VALUE FROM PRODUCTION IS WEALTH IN 
POLITICAL ECONOJIY. 

Wealth as fixed in "Progress and Poverty "—Cotirse of the scholastic 
political economy— The reverse method of this work— The con- 
chision the same — Eeason of the disposition to include all value 
as wealth— Metaphorical meanings— Bnll and pim— Metaphor- 
ical meaning of wealth— Its core meaning— Its use to express 
exchangeability— Similar use of money— Ordinary core meaning 
the proper meaning of wealth— Its use in indiAddual economy and 
in political economy— What is meant by increase of wealth — 
Wealth and labor— Its factors nature and man— Wealth their 
resultant— Of Adam Smith— Danger of carrying into political 
economy a meaning proper in indi^ddual economy — Example of 
''money "— "Actual wealth " and "relative wealth "— " Value from 
production" and "value from obligation "—The English tongue 
has no single word for an article of wealth— Of "commodities" 
—Of "goods"— Why there is no singular in English— The at- 
tempt to form one by dropping the " s " and Anglo-German jargon. 

WE are now in a position to fix tlie meaning of 
Avealtli as an economic term. 
In '' Progress and Poverty/' wMch I desired to make 
as brief as possible, and where my main purpose was to 
fix the meaning of the word capital, I fixed the meaning 
of the word wealth direct^, as '■'■ natural products so 

270 



Cha^. XV. WEALTH IN POLITICAL ECONOMY. 271 

secured, moved, combined or altered by human labor as to 
fit them for human satisfaction." This also was the way 
in which, as I understand it, the Physiocrats, who came 
substantially to the same conclusion, had defined it. But 
the scholastic political economists, instead of either dis- 
covering for themselves or taking my hint, continued on 
the road by which Adam Smith had avoided saying finally 
what wealth was. They continued to discuss the word 
value, so confused in its various senses, in such manner 
as to give not only no conclusion as to the real meaning of 
wealth, but finally to actually destroy political economy 
itseK. 

Thus the confusion into which, after more than a hun- 
dred years of cultivation, the teaching of political econ- 
omy has fallen as to the meaning of its principal term— a 
confusion which is in reality even greater than in ordinary 
speech, that makes no pretensions to exactness in the use 
of the word— is clearly due to confusions as to the meaning 
of the term value. The scholastic development of po- 
litical economy since Adam Smith has not only confused 
the distinction between value in use and value in exchange, 
but it has tended to cover up the vital distinction between 
the two sources of value in exchange ; that originating in 
the storing up of labor, and that originating in what I have 
called obligation — often power, devoid of moral right, to 
compel the expenditure of labor. 

This is the condition in which the orthodox political 
economy now is. It ha'fe not only not discovered what its 
principal term, wealth in the economic sense, really is, but 
it has so confounded other terms as to give little light on 
the search. 

In this work therefore I have adopted a different method 
from that employed in " Progress and Poverty." Finding 
it necessary to discuss the meaning of the term value in 
a fuller way than I had before done, and seeing that in 



272 THE NATURE OF WEALTH. BooTilL 

the current political economy the only consensus of opinion 
was that all wealth had value, I adopted a method the 
reverse of that of " Progress and Poverty," and instead of 
beginning with wealth, began with value. Commencing 
with Adam Smith and inquiring what was meant by value, 
I found that in value were included two absolutely differ- 
ent things, namely, the quality of value from production, 
and the quality of value from obligation, one of which 
kinds of value resulted in wealth and the other of which 
did not. Now, value from production, which is the only 
kind of value which gives wealth, consists in application 
of labor in the production of wealth which adds to the 
common stock of wealth. Wealth, therefore, in political 
economy consists in natural products so secured, moved, 
combined or altered by human labor as to fit them for 
human satisfaction. Value from obligation, on the other 
hand, though a most important element of value, does not 
result in increase in the common stock, or in the produc- 
tion of wealth. It has nothing whatever to do with the 
production of wealth, but only with the distribution of 
wealth, and its proper place is under that heading. 

Thus in the way I have in this work adopted, that of 
proceeding analytically from value, we come to precisely 
the same conclusion as that reached in " Progress and 
Poverty," where we proceeded directly and by deduction 
— we come to the result that wealth in the politico-eco- 
nomic sense consists in natural substances that have been 
so secured, moved, combined or altered by human labor 
as to fit them for human satisfaction. Such substances are 
wealth and always have value. When they cease to have 
value they of course cease to be wealth. 

Thus, proceeding by the way adopted in this work, we 
reach precisely the same conclusion as to wealth as by the 
way adopted in my previous work. The advantages of 
adopting this mode here are that a conclusion reached by 



Chap. XV. V/EALTH IN POLITICAL ECONOMY. 273 

the methods familiar to the students of the scholastic po- 
litical economy can with difficulty be ignored by them, and 
that in going in this way over the subject of value much 
has been seen both for the present and the future that was 
necessary to a full treatise on the science of political econ- 
omy and that may elsewhere be dispensed with. 

I wish therefore particularly to call the attention of the 
reader to what has been here done. Not that I hope that 
anything that I can do, unaccompanied or unsucceeded by 
a great change in general conditions, can long keep down 
the disposition which this tendency of political economy 
that I have alluded to shows. 

As there is a reason for everything, in the mental world 
as truly as in the physical world, so there is a reason for 
this disposition to include in the term wealth everything 
that has value, without regard to the origin of that value. 
It springs at bottom from the desire on the part of those 
who dominate the accredited organs of education and 
opinion (who wherever there is inequality in the distribu- 
tion of wealth are necessarily the wealthy class) to give to 
the mere legal right of property the same moral sanction 
that justly attaches to the natural right of property, or at 
the very least to ignore anything that would show that 
the recognition of a legal right may involve the denial of 
a moral right. As the defenders of chattel slavery, and 
those who did not wish to offend the slave power, not long 
since dominant in the United States, were obliged to stop 
their examination of ownership with purchase, assuming 
that the purchase of a slave carried with it the same right 
of ownership as did the purchase of a mule or of a bale of 
cotton, so those who would defend the industrial slavery 
of to-day, or at least not offend the wealth power, are 
obliged to stop their examination of the nature of wealth 
with value, assuming that everything that has value is 
therefore wealth, thus involving themselves and leaving 



274 THE NATUEE OF WEALTH. Book 11. 

their students in a fog of confusions as to the nature of 
the thing whose laws they profess to examine. 

But to whomsoever wishes really to understand political 
economy there is now no difficulty in coming to a clear and 
precise determination of the nature of wealth, whichever 
way he may elect to begin. 

The power of the imagination, nay even that power of 
recognizing likeness and unlikeness, in which perception 
itself consists, always expands by metaphor the primary 
or fundamental meaning of a word in common use, and it 
is by reason of this, even more than by the adoption of 
new root words, that a language grows in copiousness, 
flexibility and beauty. Thus such words as light and dark- 
ness, sunshine and rain, to eat and to drink, are put by 
metaphor and simile to a multiplicity of uses in common 
speech. We speak of the light of hope, or the light that 
beats upon a throne, or the light of events ; of a dark pur- 
pose, or a dark saying, or a darkened intellect; of the 
sunshine of love or prosperity, or of a sunny countenance ; 
of a rain of bullets, or a rain of misfortunes, or a rain of 
questions or epithets ; of a ship eating into the wind, of 
rust eating iron, or of a man eating his own words ; of a 
sword drinking blood, or of a lover drinking in the looks, 
words or actions of a loved one. But such use of words 
in common speech causes no confusion as to their original 
and fundamental meaning, the core from which all figura- 
tive use of them proceeds. The broad humor of the Irish 
bull comes from our prompt recognition of the difference 
between core meaning and figurative meaning; and the 
offensiveness of the deliberate pun, from the impertinence 
of the implied assumption that we will not quickly recog- 
nize this difference. 

Now, in common speech the word wealth takes on 
such figurative meanings as do all other words in common 
use. We speak of the night's wealth of stars, of a poet's 



Ch(q). XV. WEALTH IN POLITICAL ECONOMY. 275 

■wealth of imagery, of an orator's wealth, of expression, of 
a woman's wealth of hair, of a student's wealth of know- 
ledge, or of the wealth of resource of a general, a states- 
man or an inventor ; of a porcuijine's wealth of quills or a 
bear's wealth of fur. But such uses of the word wealth 
impose no dif&culty. They are merely metaphorical ex- 
pressions of abundance. So, too, it is with what is called 
natural wealth. We speak of rich ore and poor ore, of 
rich land and poor land, of a naturally rich country and a 
naturally poor country ; of a wealth of forest or mines or 
fisheries ; of a wealth of lakes or rivers, or a wealth of 
beautiful scenery. But where anything more than abun- 
dance is expressed in such uses of the word wealth it 
is that of natural opportunity, or that of utility, or value 
in use, with which in its fundamental sense wealth has 
nothing to do. With that fundamental or core meaning 
of the word wealth, from which all such figurative uses 
spring, is inextricably blended the idea of human produc- 
tion. Whatever exists without man's agency, was here 
before he came, and will, so far as we can see, be here after 
he is gone ; or whatever is included in man himself, how- 
ever well the figurative use of the word wealth may serve 
to express its abundance or usefulness, cannot be wealth 
in the fundamental or core meaning of the word. 

So, too, is the still more common use of the word 
wealth to express the power of exchangeability or of 
commanding exertion. As commonly used the word 
wealth when apphed to the possessions of an individual 
includes all purchasing power, and is indeed in most cases 
synonymous with exchange value. But this use of the 
word is really representative, like the similar use we make 
of the word money. We say that a man has so much 
money, or so many dollars or pounds, without meaning, 
or being understood as meaning, that he has in his posses- 
sion so much actual money. We mean only that he has 



276 THE NATURE OF WEALTH. Book II. 

what would excliange for so much money. Such repre- 
sentative use of the word money or of the terms of 
money does not, in every-day affairs, in the least confuse 
us as to the real meaning of the word. If asked to explain 
what money is, no one would think of saying that sheep 
and ships, and lands and houses are money, although he 
is in the constant habit of speaking of their possession as 
the possession of money. 

So it is with the common use of the word wealth. 
Many things are commonly spoken of as wealth which we 
all know, in the true and fundamental meaning of the 
word, are not wealth at all. 

If you take an ordinarily intelligent man whose powers 
of analysis have not been muddled by what the colleges 
caU the teaching of political economy, and ask him what 
he understands at bottom by wealth, it wiU be found at 
last, though it may require repeated questioning to elimi- 
nate metaphor and representation, that the kernel of his 
idea of wealth is that of natural substances or products so 
changed in place, form or combination by the exertion of 
human labor as to fit them or fit them better for the satis- 
faction of human desire. 

This, indeed, is the true meaning of wealth, the meaning 
of what I have called " value from production." It is the 
meaning to which in pohtical economy the word wealth 
must be carefully restricted. For political economy is the 
economy of communities or nations. In the economy of 
individuals, to which our ordinary speech usually refers, 
the word wealth is commonly applied to anything having 
an exchange value as between individuals. But when 
used as a term of political economy the word wealth 
must be limited to a much more definite meaning. Many 
things are commonly spoken of as wealth in the hands of 
the individual, which in taking account of collective or 
general wealth cannot be included. Such things having 



Chap. XV. WEALTH IN POLITICAL ECONOMY. 277 

excliauge value, are commonly spoken of as wealth, since 
as between individuals or between sets of individuals they 
represent the power of obtaining v\^ealth. But they are 
not really wealth, inasmuch as their increase or decrease 
does not affect the sum of wealth. Such are bonds, mort- 
gages, promissory notes, bank-bills, or other stipulations 
for the transfer of wealth. Such are franchises, which 
represent special privileges, accorded to some and denied 
to others. Such were slaves, whose value represented 
merely the power of one class to appropriate the earnings 
of another class. Such are lands or other natural oppor- 
tunities, the value of which results from the acknowledg- 
ment in favor of certain persons of an exclusive legal right 
to their use, and the profit of their use, and which repre- 
sents only the power thus given to the mere owner to de- 
mand a share of the wealth produced by use. Increase in 
the value of bonds, mortgages, notes or bank-bills cannot 
increase the wealth of a community that includes as well 
those who promise to pay as those who are entitled to re- 
ceive. Increase in the value of franchises cannot increase 
the wealth of a community that includes those who are 
denied special privileges as well as those who are accorded 
them. The enslavement of a part of their number could 
not increase the wealth of a people, for more than the en- 
slavers gained the enslaved would lose. Increase in land 
values does not represent increase in the common wealth, 
for what landowners gain by higher prices the tenants or 
ultimate users, who must pay them, are deprived of. And 
all this value which, in common thought and speech, in 
legislation and law, is undistinguished from wealth, could, 
mthout the destruction or consumption of anything more 
than a few di-ops of ink and a piece of paper, be utterly 
annihilated. By enactment of the sovereign political 
power debts might be canceled, franchises abolished or 
taken by the state, slaves emancipated, and land retiu-ned 



278 THE NATURE OF WEALTH. Booh 11. 

to the general usufructuary ownersliip of the whole people, 
"without the aggregate wealth being diminished by the 
value of a pinch of snuff, for what some would lose others 
would gain. There would be no more destruction of 
wealth than there was creation of wealth when EHzabeth 
Tudor enriched her favorite courtiers by the grant of 
monopolies or when Boris Godoonof made -Russian peas- 
ants merchantable property. 

AH articles of wealth have value. If they lose value, 
they cease to be wealth. But aU things having value are 
not wealth, as is erroneously taught in current economic 
works.* Only such things can be wealth the production 
of which increases and the destruction of which decreases 
the aggregate of wealth. If we consider what these things 
are, and what their nature is, we shall have no difficulty in 
defining wealth. 

When we speak of a community increasing in wealth — 
as when we sa}/ that England has increased in wealth since 
the accession of Victoria, or that California is now a 
wealthier country than when it was a Mexican territory — 
we do not mean to say that there is more land, or that the 
natural powers of the land are greater, for the land is the 
same and its natural powers are the same. Nor yet do 
we mean that there are more people in the same area, for 
when we wish to express that idea we speak of increase of 
population. Nor yet do we mean that the debts or dues 
owing by some of these people to others of their number 
have increased. But we mean that there is an increase of 
certain tangible things, having a value that comes from 
production, such as buildings, cattle, tools, machinery. 



* See, for instarLce, a book used as a text-book in many of the 
American and English colleges, the ''Political Economy," by Francis 
A.Walker, third edition. New York, 1888, Sec. 7. "Wealth com- 
prises all articles of value and nothing else." 



Chap. XV. WEALTH IN POLITICAL ECONOMY. 279 

agricultural and mineral products, manufactured goods, 
slaps, wagons, furniture and the like. The increase of 
such things is an increase of wealth ; their decrease is a 
lessening of wealth ; and the community that, in propor- 
tion to its numbers, has most of such things is the wealthi- 
est community. The common character of these things is 
that of natural substances or products which have been 
adapted by human labor to the satisfaction of human 
desire. 

Thus, wealth, as alone the term can be used in political 
economy, consists of natural products that have been se- 
cured, moved or combined, so as to fit them for the grati- 
fication of human desires. It is, in other words, labor 
impressed upon matter in such a way as to store up, as the 
heat of the sun is stored up in coal, its power to minister 
to human desires. Nothing that nature supplies to man 
without the expenditure of labor is wealth ; nor yet does 
the expenditure of labor result in wealth unless there is a 
tangible product which retains the power of ministering 
to desire ; nor yet again can man himself, nor any of his 
powers, capabilities or acquirements, nor any obligation 
to bestow labor or yield up the products of labor from one 
to another, constitute any part of wealth. Nature and 
man— or, in economic terminology, land and labor— are 
the two necessary factors in the production of wealth. 
Wealth is the resultant of their joint action. 

And though Adam Smith nowhere formally defined 
wealth, being mainly occupied with showing that it did 
not consist excliisivel}'- in money or the precious metals ; 
and though incidentally he fell into confusion in regard 
to it, yet, as may be seen from the passages in the " Wealth 
of Nations" before quoted,* this was his idea of wealth 
when he came to look at it directly— the idea of products 

* Page 28. 



280 THE NATURE OF WEALTH. Bool 11. 

of labor, still retaining the power, impressed on them by 
labor, of ministering to human desire. 

Now in our common use of the word wealth we make 
no distinction between the various kinds of things that 
have value, as to the origin of that value, but class them 
all together under the one word, wealth, speaking of the 
sum of value which an individual may have at his com- 
mand as his wealth, or sometimes as his money. This 
metaphorical use of words is so embedded in common 
speech that it would be hopeless to object to it in common 
usage. 

So far indeed as such use of the word wealth is con- 
fined to the province of individual economy, the relations 
of man to man, no harm whatever results. But as I said 
in the introductory, of all the sciences, political economy is 
that which comes closest to the thought of the masses of 
men. All men living in society have some sort of political 
economy, even though they do not recognize it by that 
name ; and no matter how much they may profess igno- 
rance, there is nothing as to which they less feel ignorance. 
From this comes a danger that the loose use of a word in 
common thought, where it does no harm, may be insensibly 
transferred to thought on economic questions, where it may 
do great harm. 

To take an example : Our common habit of estimating 
possessions in terms of money does no harm whatever, so 
long as it is confined to the sphere of individual affairs, in 
which that use has grown up. When, sticking strictly to 
the idea of the individual, we speak of a man owning or 
making or obtaining so much money, we are perfectly well 
understood, both in our own minds and by others, as 
meaning not really money, but monej^'s-worth. Yet, in 
passing insensibly into the field of political economy, this 
habit of speaking of money's-worth as money gave enor- 
mous strength to what Adam Smith called the mercantile 



Chap. XV. WEALTH IN POLITICAL ECONOMY. 281 

system of political economy, or what is now called the pro- 
tective system— a system which has for centuries molded 
the polity of nations of the European civilization, and 
which, though now more than a hundred years after the 
publication of the "Wealth of Nations," still continues 
largely to mold it. Both on this account and on account 
of other delusions which have taken root in the sphere of 
economic thought from the habit of commonly using the 
word money as synonymous with money's-worth, it is to 
be wished there were some word or phrase in common use 
that would express the distinction even when not absolutely 
necessary, between actual money and money's-worth. 

The occasional use of some such distinction in common 
speech between wealth and wealth's-worth is even more 
to be Avished for. There is more danger of injurious con- 
fusion from the insensible transference to the economic 
sphere of the vague uses of the word wealth which 
suffice for the individual sphere than is the case with simi- 
lar common uses of the word money. And although the 
scholastic political economists have been since the time 
of Adam Smith largely alive to the confusions introduced 
into political economy by treating money and money's- 
worth as synonjmaous, and thus, so far as their influence 
has reached, helped to guard against any danger from the 
transference of the common use of the word money to 
economic thought ; the sanction of the most respectable 
colleges and universities is now given to uses of the eco- 
nomic term wealth in a way that only conscious metaphor 
permits in common speech. 

Now since our metaphorical use of the word wealth in 
the sense of wealth's-worth or value is so deeply rooted, it 
is to be wished that in common speech, or at least wher- 
ever common speech tends into the province of political 
economy, as it continually does, we should distinguish 
between true wealth and metaphorical or representative 



282 THE NATURE OF WEALTH. BoolcII. 

wealth, by the use of such, words as "actual wealth"* 
and "relative wealth," meaning by the one that which is 
actually wealth, as being a product of labor, and by the 
other that which is not in itself wealth, although, possess- 
ing value, it will exchange for wealth. Yet this would be 
too much to try, and I think all may be had that it is 
possible to gain by clearly showing, as I have tried to do, 
that there are two kinds of value, one the value from pro- 
duction that adds to wealth, and the other the value from 
obligation that does not. 

The sum of wealth in civilized society consists of things 
of many different kinds having the common character of 
holding in store, as it were, the ability of labor to minister 
to desire. Yet there is in English no single word which 
will clearly and definitely express the idea of an article of 
wealth, nor has the usage of economists yet fairly adapted 
any single word to that meaning as an economic term. 

The word "commodity" will serve in many cases. But 
while it would be hard to speak of such an article of 
wealth as a railroad, a bridge, a massive building, or the 
result of the plowing of a field as a commodity, there are 
other things, usually accounted commodities, since they 
have value in exchange, that are not properly articles of 
wealth — such as lands, bonds, mortgages, franchises, etc. 

The word " goods " as commonly used also comes near 
to the idea of " articles of wealth." But it has connota- 
tions if not limitations which make its meaning too narrow 
fully to express the idea. And even if these were set 
aside, as they are by a friend of mine, the wife of the 
superintendent of a Western zoological garden, who, 
coming to New York with her husband on the annual trip 



* With a certain justification whicli will be indicated in the next 
chapter the lawyers have already appropriated the term " real estate," 
or real wealth, to what is in greater part not wealth at all. 



Cliaj). XV. WEALTH IN POLITICAL ECONOMY. 283 

he makes to buy wild animals, jokingly speaks of ''shop- 
ping for menagerie goods," there would still remain an 
insuperable difficulty. '' Goods," in the meaning of articles 
of wealth, has in English no singidar, and it is impossible 
to make any, because the singular form of the same word 
abeady holds the place with a different meaning. While 
we cannot speak of "a single goods," still less can we 
make a singular by dropping the '' s." Even though usage 
should confirm our speaking of the stock of a dealer in 
wild animals as goods, it would be to destroy the well- 
established use of the word to speak of a tiger, a hyena or 
a cobra-de-capello as " a good." 

In its most general use " good" is an adjective, express- 
ing a quality which can be thought of only as an attribute 
of a thing. As a noun, '' good " does not mean a tangible 
thing at all, but a state or condition or quality of being. 
To try to force either a noun of accepted meaning or an 
adjective of accepted meaning to do duty as the singular 
of a noun of totally different meaning is to injure our Eng- 
lish tongue, both as a vehicle of intelligible speech and an 
instrument of precise thought. 

To what confusions of thought as well as of speech the 
attempt to force a singular of the word "goods" leads, 
may be seen in recent university text-books of political 
economy; such as that of Professor Marshall of Cambridge 
University, England. Whoever tries to discover what they 
mean by wealth will find himself struggling with a jargon 
in which he will have more difficulty in recognizing his 
mother tongue than in pigeon-English— a jargon of such 
terms as " material goods " and '' immaterial goods," "inter- 
nal goods" and "external goods," "free goods" and "eco- 
nomic goods," "personal goods" and "collective goods," 
"transferable goods "and "non-transferable goods," with 
occasional bursts of such thunderous sound as " external- 
material-transferable goods," " internal-non-transferable 



284 THE NATURE OF WEALTH. Book 11. 

goods," ''material-external-non-transferable goods" and 
"personal-external-transferable goods," with all their re- 
spective singulars. 

There is in English no singular of the word "goods," 
and the reason is that there is no need for one, since when 
we want to express the idea of a single item or article in a 
lot of goods, it is better to use the specific noun, and to 
speak of a needle or an anchor, a ribbon or a blanket, as 
the case may be ; and where I shall have occasion to speak 
of a single item of wealth, without reference to kind, or 
of the plural forms of the same idea, I shall speak of an 
article or of articles of wealth. 



CHAPTER XVI. 
THE GENESIS OF WEALTH. 

SHOWING HOW WEALTH ORIGINATES AND WHAT IT 
ESSENTIALLY IS. 

Eeason of this inquiry— Wealth proceeds from exertion prompted 
by desire, but all exertion does not result in wealth— Simple ex- 
amples of action, and of action resulting in wealth — " Eiding and 
tjdng " — Sub-divisions of effort resulting in increments of wealth- 
Wealth essentially a stored and transferable service— Of trans- 
ferable service — The action of reason as natural, though not as 
certain and quick as that of instinct— Wealth is service impressed 
on matter— Must be objective and have tangible form. 

IT is so all-important that we should know precisely and 
certainly just what the chief factor of political econ- 
omy, wealth, is, so that we may hereafter be in no doubt 
whatever about it but may confidently reason from our 
knowledge of its nature, that I propose to reinforce all that 
has been said by showing just how wealth originates and 
what in essence it actually is. 

Wealth is a result of human exertion. But all human 
exertion does not result in wealth. Not merely is there 
failure and misadventure in the application of effort to 
the production of wealth, but the production of wealth is 
not the only purpose of human effort. 

All human actions proceed from desire and have their 
aim and end in the satisfaction of desii'e. But if we con- 

285 



286 THE NATURE OP WEALTH. Booh 11. 

sider those actions of men which aim at material satisfac- 
tions, we see that there is a distinction as to the way in 
which satisfaction is sought. In some the satisfaction 
sought is direct and immediate. In others it is indirect 
and delayed. 

To put myself in imagination in the position of my most 
remote ancestor : I am moved by the desire we call hunger 
or appetite, or it is aroused in me hy the sight of a tree 
laden with fruit. I pluck and eat the fruit, and am satis- 
fied. Or I feel the desire called thirst, and stooping down 
to a spring, I drink, and am again satisfied. Action and 
satisfaction are in such cases confined to the same person, 
and the connection between them is direct and immediate. 

Or, my wife is with me. She feels the same desires; 
but is not tall enough to pluck the fruit and cannot as 
well climb a tree or so readily stoop to the spring. So, 
impelled by that primordial impulse that ordains that the 
desire of the man shall be to the woman no less than the 
desire of the woman to the man, I pluck fruit that she may 
eat, and hollowing my hands give her to drink. In this 
case the action is on the part of one person ; the satisfaction 
proceeding from the action is obtained by another.* This 
transfer of the direct result of action we speak of as a ser- 
vice rendered and received. But the connection between 
action and satisfaction is still direct and immediate, the 
causal relation between the two having no intermediate 
link. 

These two examples are types of the ways in which 
many of our actions attain satisfaction. These are the 
ways in which in nearly all cases the animals satisfy their 
desires. If we except the storing and hiving animals, and 

* There is of course on my part both a desire and a satisfaction— 
a desire that her desires may be satisfied and a satisfaction when they 
are satisfied. But these are secondary, the primary end and aim of 
my action being the satisfaction of her desires. 



Chap. XVL THE GENESIS OF WEALTH. 287 

the almost accidental cases in which a predatory animal 
kills a victim too large to be consumed at once, there is 
nothing in their actions which goes beyond the direct 
and immediate satisfaction of desire. The cow that has 
browsed all day or the bird that has brought worms to 
her young has done nothing towards the satisfaction of 
desire that will recur to-morrow. 

In such cases there is no suggestion of anything we 
would call wealth. And in a world where all human de- 
sires were satisfied in this direct and immediate way there 
would be no wealth, no matter how great the activities of 
man or how abundant the spontaneous offerings of nature 
for the satisfaction of his desires. 

But man is a reasoning being, who looks beyond the 
immediate promptings of desire, and who adapts means 
to ends. An animal would merely eat of the fruit or 
drink of the spring to the full satisfaction of present de- 
sire. But the man bethinking himseK of the recurrence 
of desire might, after satisfying his immediate desire, 
carry off with him some of the fruit to insure a like satis- 
faction on the morrow, or with a still longer prevision plant 
its kernel with a view to satisfaction in future years. Or 
with a Adew to the future satisfaction of thirst, he might 
enlarge the spring or scoop out a vessel in which to carry 
water, or dig a channel or construct a pipe. In such cases 
action would be spent not in the direct and immediate 
satisfaction of desire, but in the doing of what might in- 
directly and in the future aid in satisfying desire. 

In these cases is something which did not exist in the 
previous cases, and which, save among the storing animals, 
has nothing analogous to it in animal life.* This something 
is wealth. It consists of natural substances or products, 
so changed in place, form or combination by the exertion 

* Page 15. 



288 THE NATUEE OF WEALTH. Book 11. 

of human labor as better to fit them for the satisfaction 
of human desires. 

The essential character of wealth is that of the embodi- 
ment or storage in material form of action aiming at the 
satisfaction of desire^ so that this action obtains a certain 
permanence— a capability of remaining for a time as at 
a stopping-place, whence it may be taken, either to yield 
satisfaction to desire, or to be carried forward towards the 
satisfaction of desire requiring yet more effort. 

Where two men mshing to travel over a determined 
road have between them but one horse, they frequently 
^' ride and tie." That is, John rides forward for a certain 
space, leaving Jim to follow on foot. He then ties the 
horse, pushing forward himself on foot. When Jim comes 
up, he unties the horse, and in his turn rides forward for 
some distance past John, and then tying the horse again 
for John to take, pushes forward. And so on to the 
journey's end. In this tying of the horse, so that he may 
be taken and ridden forward again, is something analogous 
to the way in which effort towards the satisfaction of desire 
is fixed or tied up in wealth, from which it may be taken 
for the gratification of desire, or for the purpose of being 
carried forward by additional effort to a point where it 
may serve to gratify desires requiring larger effort. 

Thus, for the satisfaction of desire by the eating of bread, 
effort must first be expended to grow the grain ; then to 
harvest it; then to grind it into flour; then to bake the 
flour into bread. At each of these stages (and they may 
be sub-divided) there is an increment of wealth : that is to 
say, some part of the effort required to reach the point of 
yielding the final satisfaction has been accomplished, and 
is tied or stored in concrete form, so that what has been 
gained towards the final result may be utilized in the re- 
maining stages of the process. Grain is an article of wealth 
expressing the effort necessary in growing and harvesting, 



Chap. XVL THE GENESIS OF WEALTH. 289 

in such form that it may be from thence carried forward 
to the satisfaction of desire, either by feeding it to do- 
mestic animals, converting it into starch or alcohol, etc., 
or by turning it into flour and making bread. Flour again 
is an article of wealth embodying the effort necessary to 
the production of grain and the further effort required in 
grinding ; and bread an article of wealth embodying that 
and the additional effort required in baking, in a form in 
which consumption (in this case eating) will give the satis- 
faction to desire of which bread is caj)able. 

The idea of wealth cannot be reduced to that of satisfac- 
tion, since, even when the intent and the result of the effort 
is the satisfaction of a desire on the part of the expender 
of the effort, there is necessarily an intermediate step, in 
which the expended effort pauses or is stored up for an 
interval in concrete form, and whence it may be released 
not merely to satisfy the desire of the expender of the 
effort, but that of another as well. If I pluck fruit to-day 
for the satisfaction of to-morrow's appetite, the satisfaction 
I then obtain when eating it would not be to me then the 
direct result of an effort, but would yield me satisfaction 
as the result of a service— a service of which I myself 
would be the direct beneficiary, but still no less truly a 
service than it would be in the case of my wife were she 
the recipient of the satisfaction obtained by eating it. 

Thus if we wish to bring the idea of wealth into a larger 
generalization, the term of widest inclusiveness that we 
could select would be a word which would express the idea 
of service without limitation as to mode. The essential 
idea of wealth is really that of service embodied in material 
form, and all our enjoying of wealth, or exchanging of 
wealth, or giving of wealth, or obtaining of wealth, is 
really at bottom the enjoying or exchanging or giving 
or obtaining of service, a word which involves the possi- 
bility of distinction in person between the exertor of 



290 THE NATUEE OF WEALTH. Book 11. 

effort and the recipient of tlie final satisfaction, which is 
its aim. 

Service of some sort is essential to life, as it may weU be 
doubted if even in what the microscope may show us of 
the lowest rounds of life's ladder there is anything that 
comes into life and maintains life self-contained and self- 
sufflcing. 

But the first and simplest form of service, that in which 
the recipient gets directly the satisfaction brought about 
by the action (and to which for the sake of distinction the 
term service should be reserved), though it is capable of 
being given, received and exchanged, is so capable only 
within very narrow limits, since the action is spent in such 
direct service and is over and done, whereas in action re- 
sulting in wealth the action is not spent, but is stored or 
tied in intermediate and material form, to be spent in 
gratification when required. In direct ser^dce the power 
of human action to satisfy human desire is like the exer- 
tion of the power of electricity in the lightning-flash or 
the spark of the Leyden jar. But in indirect service, 
through the medium of wealth, the action remains unused 
for a time in readily exchangeable form, whence it may be 
called forth for use, as the power of electricity remains in 
transportable and exchangeable form in the storage bat- 
tery. So narrow indeed are the Hmits to the exchange of 
direct service for direct service that though this sometimes 
takes place even in our highest civilization, it is clear that 
were it the only mode in which the action of one person 
could be used in procuring satisfaction to another, nothing 
like what we call civilization could exist, nor indeed do I 
think that human life, in any stage in which we know it, 
could continue. 

I may black your boots with the understanding that you 
shall in return shave my face, or gratify you by telling a 
story on condition that you shall gratify me by singing a 



Chap. XVI. THE GENESIS OF WEALTH. 291 

song, and the possibilities of such exchange may be some- 
what widened by the imderstanding that though I black 
your boots or tell you the story to-day, you may give me 
the shave or sing the song at a future time, and do this 
either for me or for any one whom I may present to re- 
ceive in my place the promised service. But manifestly 
the exchange of services that may take place in that way 
is as nothing compared with the exchange that becomes 
possible when service is embodied in concrete form in 
wealth and may be passed from hand to hand and used 
at will in the satisfaction of desire. 

By this transmutation of labor into wealth the exchange 
even of such services as cannot be transmuted into wealth, 
since they must be rendered directly to the person, is 
much facilitated. I desire, for instance, such service from 
another as the carrying of a bag or message, or the con- 
veyance of myself and luggage from one place to another 
by cab, or stage, or train. There is no equivalent service on 
my part desired by those for whose services I wish, nor if 
there was could I stop to render it ; but by the interven- 
tion of wealth the satisfaction of desire on both sides be- 
comes possible, and the exchange is completed there and 
then ; those from whom I obtain the service receiving from 
me some article of wealth or representative of wealth which 
they can in turn exchange either for wealth or for direct 
services from others. It is thus, and only thus, that the 
great body of exchanges of direct services that take place 
in civilization becomes possible. Indeed, without wealth it 
is difficult to see how men could avail themselves of one 
another's powers to a much greater extent than do the 
animals ; for that some animals exchange services, whoever 
has watched monkeys reciprocally ridding each other of 
fleas must have realized. Wealth is produced by man and 
consequently there could be no wealth in the world until 
after man came, just as bees must have preceded the honey 



292 THE NATURE OE WEALTH. Book II. 

which they make. But though man has no wealth-making 
instinct as the bees have a honey-making instinct, yet 
reason supplies its place, and man produces wealth just as 
naturally and certainly as the bees make honey— so natu- 
rallj^ and so certainly that save in unnatural and temporary 
conditions, men destitute of all forms of wealth have never 
been found. 

The essential idea of wealth being that of exertion im- 
pressed on matter, or the power of rendering service stored 
in concrete form, to talk of immaterial wealth as some 
professed economists now talk, is as much a contradiction 
in terms as it would be to talk of square circles or triangu- 
lar squares. Nothing can be really an object of wealth 
that is not tangible to the senses. Nor in the strict sense 
of the term, can wealth include any natural substance, or 
form, or power, unmodified by man's exertion, nor any 
human power or capacity of exertion. To talk of natural 
wealth, or to talk of human skill, knowledge or energy as 
included in wealth is also a contradiction in terms. 



CHAPTER XVII. 
THE WEALTH THAT IS CALLED CAPITAL. 

SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS. 

Capital is a part of wealth used indirectly to satisfy desire— Simple 
illustration of fruit— Wealth permits storage of labor— The bull 
and the man— Exertion and its higher powers— Personal qualities 
cannot really be wealth or capital— The taboo and its modern 
form — Common opinion of wealth and capital. 

AS we have seen, aU wealth, is not devoted in consump- 
XjL tion to the satisfaction of desire. Much of it is de- 
voted to the production of other forms of wealth. That 
part of wealth so devoted t6 the production of other wealth 
is what is properly called capital. 

Capital is not a different thing from wealth. It is but 
a part of wealth, differing from other wealth only in its 
use, which is not directly to satisfy desire, but indirectly 
to satisfy desire, by associating in the production of other 
wealth. 

I have spoken of wealth as the concrete result, the tan- 
gible embodiment, by change wrought in material things, 
of labor exerted towards the satisfaction of desire, without 
as yet having reached or completely reached the point of 
satisfaction, consumption. 

Now, if this concrete result of labor, wealth, be used, 
not in du-ectly satisfying desire by consumption, but for 
the purpose of obtaining more wealth, it becomes in that 

293 



294 THE NATURE OF WEALTH. Booh II. 

use wliat we term capital. It is wealth devoted not to the 
final use of wealth, the satisfaction of desires, but turned 
aside, as it were, to pass through another stage, by which 
more wealth may be secured and the final possibilities of 
satisfaction increased. 

To return to the simplest illustration given in the chap- 
ter treating of wealth : The man who, finding a fruit-tree, 
plucks and eats, spends his labor in the most direct and 
primitive form, that of satisfying desire. His desire is for 
the moment satisfied, but the labor he has exerted is all 
spent; no result remains which will help to the future 
satisfaction of desire. 

But if not content with the satisfaction of present desire 
he carries off some of the fruit to where he may in the 
future more conveniently obtain it, he has in this gathered 
fruit a concrete result of the expenditure of labor. His 
labor ex]3ended in the gathering and removal of the fruit 
which he retains has been as it were stored up, as energy 
may be stored up by bending a bow or raising a stone, to 
be utilized again at a future time. This stored-up labor, 
concretely in this case— this gathered and transported fruit, 
is wealth, and mil retain this character of wealth or stored- 
up labor, until it is (1) consumed, by being applied to the 
gratification of desire ; or (2) destroyed, as by decay, the 
ravages of insects or animals, or some other change which 
takes away its potency of aiding in the satisfaction of 
desire. 

But the man who has thus obtained the possession of 
wealth by gathering fruit and carrying it to a more con- 
venient place may utilize its potency of ministering to 
desire in different ways. Let us suppose him to divide 
this wealth, this gathered fruit, into three portions. One 
portion he will eat as he feels desire ; another portion he 
will give to some other man in exchange for some other 
form of wealth ; and the third portion he will plant in order 



Chap. XVII. WEALTH THAT IS CALLED CAPITAL. 295 

that in the futm-e he may more readily and more abun- 
dantly satisfy his desire for such fruit. 

All three of these portions are alike wealth. But the 
first portion is merely wealth ; its use is the final use of 
aU wealth— the satisfaction of desire. But the second and 
third portions, are not simply wealth— they are capital ; 
their use is in obtaining more or other wealth, which in its 
turn may be used for the satisfaction of desire. 

In other words, all capital is wealth; but all wealth is 
not capital. Capital is wealth applied to the production 
of more or other wealth. It is stored labor, not applied 
by one further step to the ultimate end and aim of all 
labor, the satisfaction of desire ; but in the production of 
more wealth to the further storage of labor. 

By the storage of labor, which is involved in the pro- 
duction of wealth, it becomes possible for man to change 
the time in which a given exertion shall be utilized in the 
satisfaction of desire, thus greatly increasing the sum of 
satisfactions which given exertion may procure. And by 
the using of wealth as capital, which is the calling of past 
exertion to the service of present exertion, he is enabled 
to concentrate exertion upon a given point, at a given time, 
and to call in, as it were by the way, forces of nature which 
far transcend in their power those which nature has put 
at his use in the human frame. 

To illustrate : Nature gives to the bull in his massive 
skull and sharp horns a weapon of offense by which ahnost 
the whole strength of his frame may be concentrated upon 
one or two narrow points, thus utilizing the maximum of 
force upon the minimum of resistance. She has given to 
man no such weapon, for his clenched fist, the nearest 
approach to the horns of the bull his bodily resoui'ces 
furnish, is a far inferior weapon. But by turning his 
labor into capital in the shape of a spear he is enabled on 
occasion to concentrate nearly the whole force of his body 



296 THE NATURE OF WEALTH. Book 11. 

upon an even narrower point than can tlie bull ; and by 
turning labor into capital in the form of a bow or crossbow 
or sling, he may exert in one instant the force that can be 
accumulated during longer intervals of time ; and finally, 
as the result of many transmutations of labor into capital, 
he can exert in the rifle chemical forces more potent than 
any of the forces of which the energies of his own body 
give him command. 

Wealth, in short, is labor, which is raised to a higher or 
second power, by being stored in concrete forms which 
give it a certain measure of permanence, and thus permit 
of its utilization to satisfy desire in other times or other 
places. Capital is stored labor raised to a still higher or 
third power by being used to aid labor in the production 
of fresh wealth or of larger direct satisfactions of desire. 

It is Hkewise to be observed that capital being a form 
of wealth— that is to say, wealth used for the purpose of 
aiding labor in the production of more wealth or greater 
satisfactions— nothing can be capital that is not wealth, 
and the term capital is subject to all the restrictions and 
limitations that apply to the term wealth. Personal 
qualities such as knowledge, skill, industry, are qualities 
of labor and can never be properly treated as capital. 
Wliile in common speech it may be permissible to speak in 
a metaphorical sense of such qualities as capital, meaning 
thereby that they are susceptible of jdelding to their pos- 
sessors advantages akin to the advantages given by capital, 
yet to transfer this metaphorical use of speech to eco- 
nomic reasoning is, as many ponderous treatises will 
testify, provocative of fundamental confusion. 

And so, while the possession of slaves, of special privi- 
leges, of public debts, of mortgages, or promissory notes, 
or other things of the kind I have spoken of in treating 
of spurious wealth, may in the hands of the individual 
possessor be equivalent to the possession of capital, they 



Chaj^. Xril. WEALTH THAT IS CALLED CAPITAL. 297 

can constitute no part of real capital. All the public debts 
of the world do not add in the slightest degree to the capi- 
tal of the world— are incapable of aiding by one iota in the 
production of wealth; while the greater part of what 
figures in our official reports as capital invested in rail- 
roads, etc., is in reality nothing but the inflation of expec- 
tation. Capital in the economic sense is a tangible, material 
thing— matter changed in place, form or condition, so as 
to fit it for human uses, and applied to aiding labor in the 
production of wealth or direct satisfactions. 

To recur to our first simple illustration : A high chief 
of the Hawaiian Islands in the old heathen days might, on 
discovering a tree laden with fruit, have eaten his fill and 
then laid the tree under taboo. He might thus have ob- 
tained for himself something of the same advantages that 
he would have obtained by carrying some of the fruit to 
a more convenient place, for the inhibition upon others 
might have led some of them, in return for the privilege 
of taking it, to consent to bring him some. But the result 
would not have been the same to the community as a 
whole. His Laziness could have obtained the fruits of 
labor, but only by virtually taking the labor of others. 

And so the son of an Hawaiian missionary, who in the 
legal ownership of land holds the Christian equivalent of 
the old heathen power of taboo, may in return for the 
privilege of permitting others to apply labor to his land 
compel them to bring him wealth or capital. The posses- 
sion of this power so far as he himself is concerned is 
equivalent to the possession of wealth or capital, but not 
so to the community. It implies no addition to the sum 
of production or to the power of future production. It 
implies merely a power of affecting the distribution of 
what may already by other agencies be produced. 

This fact that part of what is really wealth is capital, 
and that what is not wealth is not capital, is so clear that 



298 THE NATURE OF WEALTH. Booh 11. 

it is really recognized in ordinary speech if we pay atten- 
tion to the core, or original meaning of the words. As I 
say in " Progress and Poverty," when speaking of capital 
(Book L, Chapter II., ^'The Meaning of the Terms") : 

If the articles of actual wealth existing at a given time in a given 
community were presented in situ to a dozen intelligent men who had 
never read a line of political economy, it is doubtful if they would 
differ in resj)ect to a single item, as to whether it should be accounted 
capital or not. Money which its owner holds for use in his business 
or in speculation would be accoimted capital; money set aside for 
household or personal expenses would not. That part of a farmer's 
crop held for sale or for seed, or to feed his help in pai't payment of 
wages, would be accounted capital ; that held for the use of his own 
family woiild not be. The horses and carriage of a haekman would 
be classed as capital ; but an equipage kept for the pleasure of its 
owner would not. So, no one would think of counting as capital 
the false hair on the head of a woman, the cigar in the mouth of a 
smoker, or the toy with which a child is playing ; but the stock of a 
hair-dealer, of a tobacconist, or the keeper of a toy-store, would be 
unhesitatingly set down as capital. A coat which a tailor had made 
for sale would be accounted capital ; but not the coat he had made 
for himself. Food in the possession of a hotel-keeper or a restaura- 
teur would be accounted capital ; but not the food in the pantry of a 
housewife, or in the lunch-basket of a workman. Pig-iron in the 
hands of the smelter, or founder, or dealer, would be accounted capi- 
tal ; but not the pig-iron used as ballast in the hold of a yacht. The 
bellows of a blacksmith, the looms of a factory, would be capital ; but 
not the sewing-machine of a woman who does only her own work ; a 
building let for hire, or used for business or productive purposes ; 
but not a homestead. In short, I think we should find that now, as 
when Dr. Adam Smith wrote, " that part of a man's stock which he 
expects to yield him a revenue is called his capital." And, omitting 
his unfortunate slip as to personal qualities, and qualifying some- 
what his enumeration of money, it is doubtful if we could better list 
the different articles of capital than did Adam Smith in the passage 
which in the previous part of this chapter I have condensed. 

Now, if, after having thus separated the wealth that is capital 
from the wealth that is not capital, we look for the distinction 
between the two classes, we shall not find it to be as to the charac- 
ter, capabilities, or final destination of the things themselves, as has 
been vainly attempted to draw it, but it seems to me that we shall 



Chap. XVII. WEALTH THAT IS CALLED CAPITAL. 299 

find it to be as to whether they are or are not in the possession of the 
consumer.* Such articles of wealth as in themselves, in their uses, 
or in their products, are yet to he exchanged are capital ; such articles 
of wealth as are in the hands of the consumer are not capital. Hence, 
if we define capital as wealth in course of exchange, understanding 
exchange to Include, not merely the passing from hand to hand, but 
also such transmutations as occur when the reproductive or trans- 
forming forces of nature are utilized for the increase of wealth, we 
shall, I think, comprehend all the things that the general idea of 
capital x^roperly includes, and shut out all it does not. Under this 
definition, it seems to me, for instance, will fall all such tools as are 
really capital. For it is as to whether its services or uses are to be 
exchanged or not which makes a tool an article of capital ; or merely 
an article of wealth. Thus the lathe of a maniifacturer used in 
making things which are to be exchanged is capital ; while the lathe 
kept by a gentleman is not. Thus wealth used in the construction 
of a railroad, a public telegraph line, a stage-coach, a theater, a 
hotel, etc., may be said to be placed in the course of exchange. The 
exchange is not effected all at once, but little by little, with an 
indefiuite number of people. Yet there is an exchange, and the 
"consumers" of the railroad, the telegraph line, the stage-coach, 
theater or hotel, are not the owners, but the persons who from time 
to time use them. 

Nor is this definition inconsistent with the idea that capital is that 
part of wealth devoted to production. It is too narrow an under- 
standing of production which confines it merely to the making of 
things. Production includes not merely the making of things, but 
the bringing of them to the consumer. The merchant or storekeeper 
is thus as truly a producer as is the manufacturer or farmer, and his 
stock or capital is as much devoted to production as is theirs. But 
it is not worth while now to dwell upon the functions of capital, 
which we shall be better able to determine hereafter. Nor is the 

* Money may be said to be in the hands of the consumer when de- 
voted to the procurement of gratification, as, though not in itself de- 
voted to consumption, it represents wealth which is ; and thus what 
in the pre^dous paragi-aph I have given as the common classification 
would be covered by this distinction, and would be substantially 
correct. In speaking of money, in this connection, I am, of course, 
speaking of coin, for although paper money may perform all the 
functions of coin it is not wealth, and cannot therefore be capital.— 
["Progress and Poverty," Book I., Chapter II.] 



300 THE NATURE OF WEALTH. Booh 11. 

definition of capital I have suggested of any importance. I am not 
writing a text-book, but only attempting to discover the laws which 
control a great social problem, and if the reader has been led to form 
a clear idea of what things are meant when we speak of capital my 
purpose is served. 

But before closing this digression let me call attention to what is 
often forgotten— namely, that the terms "wealth," "capital," "wages," 
and the like, as used in political economy, are abstract terms and that 
nothing can be generally affirmed or denied of them that cannot be 
affirmed or denied of the whole class of things they represent. The 
failure to bear this in mind has led to much confusion of thought, 
and permits fallacies, otherwise transparent, to pass for obvious 
truths. Wealth being an abstract term, the idea of wealth, it must 
be remembered, involves the idea of exchangeability. The posses- 
sion of wealth to a certain amount is potentially the possession of 
any or all species of wealth to that equivalent in exchange. And 
consequently, so of capital. 



CHAPTER XVIII. 

WHY POLITICAL ECONOMY CONSIDERS 
ONLY WEALTH. 

SHOWING THAT POLITICAL ECONOJIY, AS PROPERLY STATED, 
COVERS ALL THE RELATIONS OP MEN IN SOCIETY INTO 
WHICH IT IS NECESSARY TO INQUIRE. 

Political economy does not include all the exertions for the satis- 
faction of material desires ; but it does include the greater part of 
them, and it is through value that the exchange of services for 
services is made — Its duty and province. 

POLITICAL economy has been defined, and I think 
sufficiently, as "the science which treats of the na- 
ture of wealth and the laws of its production and distri- 
bution." The object-noun or subject-matter of j)olitical 
economy is therefore wealth. Now, as we have abeady 
seen, wealth is not the only result of human exertion, nor 
is it indeed the end and aim and final cause of human 
exertion. That is not reached until wealth is spent or 
consumed in satisfaction of desire. Wealth itself is in fact 
only a halting-place or storehouse on the way between 
prompting desire and final satisfaction ; a point at which 
exertion, journeying towards the satisfaction of desire, re- 
mains for a time stored up in concrete form, and from 
whence it may be called forth to yield the satisfaction 
which is its ultimate aim. And there are exertions aiming 

301 



302 THE NATURE OF WEALTH. Boole 11. 

at the satisfaction of desire which do not pass through 
the form of wealth at all. 

Why then should political economy concern itself merely 
with the production and distribution of wealth f Is not 
the proper object of the science the production and distri- 
bution of human satisfactions, and would not this defini- 
tion, while including wealth, as material satisfactions 
through material services, also include services that do 
not take concrete form ? 

My answer is that I am not engaged in laying out a new 
science, but only endeavoring to explain and straighten 
out one that has been already much pursued. I wish, 
therefore, as far as possible, to follow old roads and to use 
accustomed terms, only swerving from them where they 
clearly lead to error, of which there are indeed instances 
enough. 

And further than this, I think that reflection will show 
that a consideration of the production and distribution of 
wealth will include about all that there is any practical use 
of considering of the production and distribution of satis- 
factions. 

While wealth does not include the sum of all exertions 
for the satisfaction of material desires, it does include what 
in a highly civilized society are the far greater part of them, 
and is, as it were, the exchange point or clearing-house 
where the transfer of services devoted not to the production 
of wealth, but to the direct procurement of satisfactions, is 
made. 

Thus the barber, the singer, the physician, the dentist, 
the actor, do not produce wealth, but direct satisfactions. 
But not only are their efforts which are expended in this 
way mainly devoted to the procurement of wealth, which 
they get in exchange for their services, but any exchange 
between themselves of services for services takes place 
through the medium of wealth. That is to say, the actor 



Chap. XVIII. WHY WEALTH ALONE CONSIDERED. 303 

does not pay his barber in recitations, or the singer pay 
his physician in tones, nor yet reversely does the barber 
or physician often pay in shaves or medical advice for the 
satisfaction of hearing, acting or singing. Each habitually 
exchanges his services for wealth or the representative of 
wealth, and exchanges this for other services that he may 
desire. Thus in civilized society it is only in rare and ex- 
ceptional cases that there is any direct exchange of services 
for services. To this we may add that the laws which 
govern the production and distribution of services are 
essentially the same as those which govern the production 
and distribution of wealth. Thus we see that all the ends 
of political economy may be reached if its inquiry be an 
inquiry into the nature of wealth and the laws that govern 
its production and distribution. 

Political economy has a duty and a province of its own. 
It is not and it cannot be the science of everything ; for 
the day in which any one scheme can include the whole 
province of human knowledge has long passed, and must 
with the increase of human knowledge further recede. 
Even to-day the science of politics, though closely related, 
is, as I conceive it, clearly distinct from the science of 
political economy, to say nothing of the almost numberless 
other schemes which treat of man's relations to other 
individuals and to the relations with which he is brought 
in contact. 



CHAPTER XIX. 
MORAL CONFUSIONS AS TO WEALTH. 

SHOWING HOW RICH AND POOR ARE CORRELATIVES, AND 
WHY CHRIST SYT.IPATHIZED WITH THE POOR. 

The legitimacy of wealtli and the disposition to regard it as sordid 
and mean— The really rich and the really poor— They are really 
correlatives— The good sense of Christ's teaching. 

AS to the desire for wealth in the politico-economic sense, 
Jl\. as I have described it, there is nothing sordid or mean. 
Wealth, on the contrary, is a perfectly legitimate object 
of desire and effort. To obtain it is simply to increase the 
powers of the individual over nature, and is prompted by 
the same essentially noble desire as in any way to increase 
our powers or our knowledge, or in any way to raise our- 
selves above the level of the mere animal, from which we 
start; while no one can increase his own wealth in the 
common sense by increasing value from production, with- 
out at the same time doing something for every one else. 

How then is it that wealth is so widely regarded askance 
by our moral perceptions ; that we are told that we should 
not seek it, and hardly even use it; that the highest 
expressions of onr deepest knowledge look at it so con- 
temptuously, if not repugnantly, and that political econ- 
omy, which is the science of the nature, production and 
exchange of wealth, should be so widely regarded as a 
selfish and hard science ? 

304 



Chap. XIX. MORAL CONrUSIONS. 305 

If we go into this question at all we must go deeper 
tlian has yet, I think, been done. 

There is a distinction on which our examination of 
wealth and value may throw light, the distinction we 
commonly make between the rich and the poor. We mean 
by a rich man a man who is possessed of much having 
value, that is to say, of much wealth or of much power of 
commanding wealth or services from others. And by a 
poor man we mean a man who possesses little or nothing 
of such values. But where is the hne of division between 
rich and poor ? There is no line distinctly recognized in 
common thought, and a man is called rich or poor accord- 
ing to the standard of average comfort prevailing in the 
society or rather the grade of society in which the estimate 
is made. Among Connemara peasants, as in the song, a 
woman of three cows might be esteemed wealthy 5 while 
among Esquimaux, as in Mark Twain's story, the posses- 
sion of a few iron fish-hooks might be as convincing a 
proof of riches as the loading of a Christian woman with 
diamonds by an American millionaire. There are circles 
of human life in New York City in which no man would 
be deemed poor who could see his way to a night's lodging 
and a breakfast in the morning, and there are other circles 
in which a Vanderbilt could say that a man possessed of 
only a million doUars could with economy live as comfor- 
tably as though he were rich. 

But is there not some line the recognition of which will 
enable us to say with something like scientific precision 
that this man is rich and that man is poor; some line of 
possession which will enable us truly to distinguish between 
rich and poor in all places and conditions of society ; a line 
of the natural, mean, or normal possession, below which 
in various degrees is poverty, and above which in varying 
degrees is wealthiness ? It seems to me that there must be. 
And if we stop to think of it, we may see that there is. 



306 THE NATURE OF WEALTH. BooTcII. 

If we set aside for the moment the narrower economic 
meaning of service, by which direct service is conveniently 
distinguished from the indirect service embodied in wealth, 
we may resolve all the things which indirectly satisfy 
human desire into one term, service ; just as we resolve 
fractions into a common denominator. Now, is there not 
a natural or normal line of the possession or enjoyment of 
service ? Clearly there is. It is that of equality between 
giving and receiving. This is the equilibrium which Con- 
fucius expressed in the golden word of his teaching that 
in English we translate into " reciprocity." Naturally the 
services which a member of a human society is entitled to 
receive from other members are the equivalents of those 
he renders to others. Here is the normal hue from which 
what we call wealthiness and what we call poverty take 
their start. He who can command more service than he 
need render, is rich. He is poor, who can command less 
service than he does render or is willing to render ; for in 
our civilization of to-day we must take note of the mon- 
strous fact that men willing to work cannot always find 
opportunity to work. The one has more than he ought to 
have ; the other has less. Rich and poor are thus correla- 
tives of each other ; the existence of a class of rich involv- 
ing the existence of a class of poor, and the reverse ; and 
abnormal luxury on the one side and abnormal want on 
the other have a relation of necessary sequence. To put 
this relation into terms of morals, the rich are the robbers, 
since they are at least sharers in the proceeds of robbery ; 
and the poor are the robbed. 

This is the reason, I take it, why Christ, who was not 
really a man of such reckless speech as some Christians 
deem Him to have been, always expressed sympathy with 
the poor and repugnance of the rich. In His philosophy 
it was better even to be robbed than to rob. In the king- 
dom of right-doing which He preached, rich and poor 



ChcqhXIX. MORAL CONFUSIONS. 807 

would be impossible, because rich and poor in the true 
sense are the results of wrong-doing. And when He said, 
" It is easier for a camel to pass through the eye of a needle 
than for a rich man to enter the kingdom of heaven !" He 
simply put in the emphatic forms of Eastern metaphor a 
statement of fact as coldly true as the statement that two 
parallel lines can never meet. 

Injustice cannot live where justice rules, and even if the 
man himself might get through, his riches — his power of 
compelling service without rendering service— must of 
necessity be left behind. If there can be no poor in the 
kingdom of heaven, clearly there can be no rich ! 

And so it is utterly impossible in this, or in any other 
conceivable world, to abolish unjust poverty, without at 
the same time abolishing unjust possessions. This is a 
hard word to the softly amiable philanthropists who, to 
speak metaphorically, would like to get on the good side 
of Grod without angering the devil. But it is a true word 
nevertheless. 



CHAPTER XX. 
OF THE PERMANENCE OF WEALTH. 

SHOWING THAT VALUES FROM OBLIGATION SEEM REALLY TO 
LAST LONGER THAN VALUES FROM PRODUCTION. 

Value from production and value from obligation— The one material 
and the other existing in the spiritual— Superior permanence of 
the spiritual— Shakespeare's boast— Mtecenas's buildings and 
Horace's odes— The two values now existing— Franchises and 
land values last longer than gold and gems— Destruction in social 
advance— Conclusions from all this. 

IN making the distinction between values from produc- 
tion that really constitute wealth in political economy, 
and values from obligation, which are not really wealth 
at all, and may at best be classified as " relative wealth " 
in contradistinction to "real wealth," there is an im- 
portant and to our usual ways of thinking an unexpected 
difference to be mentioned between them with relation to 
permanence and to the effect of the progress of society 
upon their value. 

Value from production, or real wealth, consists of material 
things. These things are taken as it were by labor from 
the reservoirs of nature, and by virtue of their materiality 
tend back to those reservoirs again from the moment they 
are taken, just as water, taken from the ocean, tends back 
to the ocean. The great body of wealth is, indeed, pro- 
duced for a purposed consumption that involves immediate 
destruction. And since I think we may properly speak in 

308 



chap. XX. PEEMANENCE OF WEALTH. 309 

a different sense of the consumption of a book by reading 
it, or of a picture or statue by looking at it, even the parts 
not subject to purposed and almost immediate destruction, 
are subject to destruction by the action of the elements, 
by mechanical and chemical disintegration, and finally by 
being lost. Indeed, the far greater part of material things 
if not absolutely all of them, after they have been brought 
into existence, require the constant exertion of labor to 
keep them in existence and prevent their relapsing into 
nature's reservoirs again. 

But things having a value which does not come from 
the exertion of labor and which represents only the power 
given by human law, agreement or custom of appropriating 
the proceeds of exertion, have their real existence in the 
human mind or will, the spiritual element of man. The 
papers which we use in transferring them, or proclaiming 
them, or evidencing them, are not the things themselves, 
but mere aids to memory. The essence of a debt is not 
the due-bill or promissory note, but a moral obligation or 
mental agreement; the essence of a franchise is not the 
written charter or engrossed act of legislature, but the 
will of the sovereign, theoretically supposed to be the will 
of all ; the ownership of land is not in the title-deeds, but 
in the same sovereign will or supposed general agreement. 

As the spii-itual part of man— mind, w411 and memory— 
continues the same while the matter of which his body is 
composed is continually passing, so a mental impression, 
recorded by tradition, belief or custom in what may be 
styled the social mentality, may endure while physical 
changes wrought by man are lost. It is probable that the 
oldest records of man's presence on the earth are to be 
found in words yet current, and that nursery rhymes and 
children's games antedate the most massive monuments. 
It was no idle boast of Shakespeare that his verse would 
outlast marble and brass. The stately buildings raised by 



310 THE NATURE OP WEALTH. Booh 11. 

the powerful prime minister of Augustus Csesar have failed 
to perpetuate his memory ; but far further than his world 
extended, the name of Maecenas yet lives for us in the odes 
of Horace. 

Now, in the same way, the values which cannot be in- 
cluded in the category of wealth are as a class much more 
enduring than the values which are properly so included. 
We of the modern civilization generally limit the time 
dui'ing which debts, promissory notes, and similar obliga- 
tions of the individual can be legally enforced. But there 
are devices by which a value which is in reality but an 
obligation to render future labor may be continued for 
longer periods ; while many values of similar nature we 
treat as perpetual, as is the case with pubhc debts, with 
some franchises, and with exclusive rights to land. These 
may retain their value unimpaired, while the value of the 
great body of articles of wealth lessens and disappears. 

How little of the wealth in existence in England two 
hundred years ago exists now ! And the infinitesimal part 
that still exists has been maintained in existence only by 
constant care and toil. But stock in the public debt of 
England incurred then still retains value. So do perpetual 
pensions granted to their favorites and lemans by English 
kings long dust. So do advowsons, rights of fishery and 
market, and other special privileges. ¥71iile such fran- 
chises as that of the New River Company, and the right 
to the exclusive use of land in many places have enormously 
increased in value. These things have cost no care or 
trouble to maintain. On the contrary, they have been 
sources of continual revenue to their owners — have enabled 
their owners to call continually upon generation after 
generation of Englishmen to undergo toil and trouble for 
their benefit. Yet their value, that is to say their power 
of continuing to do this, remains still, not merely unim- 
paired, but in many cases enormously increased. 



Cliap.XX. PERMANENCE OF WEALTH. 311 

Of all articles of value from production those whicli 
longest retain the quality of value are precious metals and 
gems. In the coin and jewelry passing from hand to hand 
in the exchanges of modern civilization there are doubtless 
some particles of metal and some precious stones that had 
value at the very dawn of history and have retained it ever 
since. But these are rare and indistinguishable exceptions. 
So far as we can see with any certainty, the quahty of 
value has longer and more constantly attached to the 
ownership of land, which is not an article of wealth, than 
to any other valuable thing. The little piece of land in 
the Sabine hills, which Maacenas gave to Horace, had 
doubtless been bought and sold and exchanged for cen- 
turies before that, and has, I doubt not, a value to this 
day. And so, certainly, with some of the building sites of 
Rome. Through all the mutations in the fortunes of the 
Imperial City, some of them have doubtless continually 
held a value, sometimes lower and sometimes higher. It 
is this permanence of value which has led the lawj'-ers to 
distinguish property in land, though it is not wealth at all, 
as real estate or real property. Its value remains so long 
as population continues around it and custom or municipal 
law guarantees the special privilege of appropriating the 
profits of its use. 

And between articles of wealth and things of the nature 
of special privileges, like franchises and property in land, 
which though ha^ang value are not wealth, there is still 
another very important distinction to be noted. The 
general tendency of the value attached to the one is to 
decrease and disappear with social advance. The general 
tendency of the value attaching to the other is to increase. 

For social advance, involving, as it does, increase of 
population, extensions of exchange and improvement of 
the arts, tends constantly, by lessening the cost of produc- 
tion, steadily to reduce the value of the great body of 



312 THE NATURE OF WEALTH. Book 11. 

articles of wealth already in existence, and having value 
from production. In some cases indeed the eifect of social 
advance is suddenly and utterly to destroy these values. 
The value of almost all the products of labor has been of 
late years steadily and largely reduced in this way, while 
the value of much costly machinery has been and still is 
being destroyed by discoveries, inventions and improve- 
ments, which render their use in production antiquated. 
But the growth of population and the augmentations of 
the productive power of labor increase enormously the 
value of such special privileges as franchises and land- 
ownership in the highways and centers of social Hfe. 

It will be seen from our analysis, as indeed from obser- 
vation, that the amount of wealth at any time existing 
is very much less than is usually assumed. The vast 
majority of mankind live not on stored wealth, but on 
their exertion. The vast majority of mankind, even in 
richest civilized countries, leave the world as destitute of 
wealth as they entered it. 

It is the constant expenditure of labor that alone keeps 
up the supply of wealth. If labor were to cease, wealth 
would disappear. 

And while this fact, that value from mere obligation 
has a permanence which does not belong to value from 
production, may have a bearing upon speculations too deep 
to be entered on here, and suggests perhaps truth on the 
part of those who say that the material universe may be 
a mere reflex and correspondence of the moral and mental 
universe, and that we may find reality not in what we caU 
life, but in what we call death, and while it may make 
comprehensible the resurrection from the dead which to 
many has been most perplexing, it has immediate bearing 
on many things to which any consideration of the true 
nature and bearings of wealth comes close if it does not 
closely touch. 



CHAPTER XXL 
THE RELATION OF MONEY TO WEALTH. 

SHOWING THAT SOBEE MONEY IS AND SOI\IE MONEY IS NOT 
WEALTH. 

Where I shall treat of money— No categorical answer can yet be 
given to the question whether money is wealth— Some money is 
and some is not wealth. 

THE subject of money, in my view of the matter, properly 
belongs to this Book, wbich treats of tbe nature of 
wealth. But the subject is at the time I write so compli- 
cated and confused by current discussions, especially in 
the United States, as to require for its complete elucidation 
a fullness of treatment that would too much expand this 
Book. And, moreover, these cm-rent discussions of what 
is and what ought to be money involve principles which 
do not find their proper place in the discussion of the 
nature of wealth, but which will be treated in the succeeding 
books on Production and Distribution. For these reasons, 
I shall postpone the fuU treatment of Money until after 
the laws of Production and the laws of Distribution have 
been discussed. But one question is certain to occur to 
the reader which must be answered here— the question, 
'' Is money wealth ? " 

To this no categorical answer can be given, for the reason 
that what we properly call money is in all countries in our 

31.3 



314 THE NATUEE OF WEALTH. Boole II. 

present stage of civilization of essentially different kinds. 
Some of the money in use to-day is wealth, and some of 
it is not wealth. Some, such for instance as the gold 
coins of the United States and England, is wealth to the 
full amount of its circulating value. Some, such as the 
silver, copper and bronze coins of the same countries, is 
wealth, but not wealth to the full extent of its circulating 
value. While some, such as the paper money, which now 
constitutes so large a part of the money of the civilized 
world, is not wealth at all. For, as we have seen, nothing 
is wealth in the economic sense, unless and in so far as the 
value which attaches to it is a value of production. The 
value arising from obhgation constitutes no part of the 
wealth of nations. 



BOOK III. 



THE PRODUCTION OF WEALTH 



CONTENTS OF BOOK III. 



THE PRODUCTION OF WEAIiTH. 



CHAPTER I. 
THE MEANING OF PRODUCTION. 

SHOWING THE MEANING AND PROPER USE OF PRODUCTION. 

PAGE 

Production a drawing forth of what before exists — Its difference 
from creation — Production other than of wealth — Includes 
all stages of bringing to be— Mistakes as to it . . . 323 

CHAPTER II. 
THE THREE MODES OF PRODUCTION. 

SHOWING THE COMMON CHARACTER, YET DIFFERENT MODES 
OF PRODUCTION. 

Production involves change, brought about by conscious will — 
Its three modes : (1) adapting, (2) growing, (3) exchanging — 
This the natural order of these modes 327 

CHAPTER III. 
POPULATION AND SUBSISTENCE. 

SHOWING THAT THE THEORY OF A TENDENCY IN POPULATION TO 
INCREASE FASTER THAN SUBSISTENCE HAS PREVIOUSLY BEEN 
EXAMINED AND CONDEMNED. 

The Malthnsian theory — Discussed in "Progress and Poverty" . 333 

317 



318 CONTENTS OF BOOK IH. 



CHAPTER IV. 

THE ALLEGED LAW OF DIMINISHING RETURNS 
IN AGRICULTURE. 

SHOWING WHAT THIS ALLEGED LAW IS. 

PAGE 

John Stuart Mill quoted as to the importance, relations and 
nature of this law — The reductio ad ahsurdum by which it 
is proved — Contention that it is a misapprehension of the uni- 
versal law of space 335 



CHAPTER V. 
OF SPACE AND TIME. 

SHOWING THAT HUMAN REASON IS ONE, AND SO FAR AS IT 
CAN GO MAY BE RELIED ON.- 

Purpose of this work — Of metaphysics — Danger of thinking of 
words as things — Space and time not conceptions of things, 
but of relations of things — They cannot, therefore, have 
independent beginning or ending — The verbal habit which 
favors this idea — How favored by poets and by religious 
teachers — How favored by philosophers — Of Kant — Of Scho- 
penhauer — Mysteries and antinomies that are really confusions 
in the meaning of words — Human reason and the eternal reason 
— Philosophers who are really word-jugglers .... 339 



CHAPTER VI. 

CONFUSION OF THE SPACIAL LAW WITH AGRI- 
CULTURE. 

SHOWING THE GENESIS OF THIS CONFUSION. 

What space is — The place to which man is confined — Extension 
a part of the concept, land — Perception is by contrast — Man's 
first use of land is by the mode of adapting — His second, and 
for a long time most important, use is by growing — The third, 
on which civilization is now entering, is exchanging — Political 
economy began in the second, and growing still attracts most 
attention — The truth and error of the Physiocrats — The suc- 
cessors of Smith, while avoiding the error of the Physiocrats, 
also ignored their truth ; and with their acceptance of the Mal- 
thusian theory, and Ricardo's explanation of rent as relating 
to agricultural land, they fell into, and have continued the 
habit of treating land and rent as agricultural — Difficulty of 
the single tax in the United States 351 



CONTENTS OF BOOK III. 319 

CHAPTER VII. 
THE RELATION OP SPACE IN PRODUCTION. 

SHOWING THAT SPACE HAS RELATION TO ALL MODES OP 
PRODUCTION. 

PAGE 

Matter being material, space must have relation to all produc- 
tion — This relation readily seen in agriculture — The concen- 
tration of labor in agriculture tends up to a certain point to 
increase and then to diminish production — But it is a mis- 
apprehension to attribute this law to agriculture or to the 
mode of growing — It holds in all modes and sub-divisions of 
these modes — Instances : of the production of brick, of the mere 
storage of brick — Man himself requires space — The division of 
labor as requiring space — Intensive and extensive use of land 357 

CHAPTER VIII. 
THE RELATION OF TIME IN PRODUCTION. 

SHOWING THAT ALL MODES OF PRODUCTION HAVE RELATION 
TO TIME. 

Difference between apprehensions of space and time, the one 
objective, the other subjective — Of spirits and of creation — 
All production requires time— The concentration of labor in 
time 365 

CHAPTER IX. 
COOPERATION — ITS TWO WAYS. 

SHOWING THE TWO WATS OF COOPERATION. 

Cooperation is the union of individual powers in the attainment 
of common ends — Its ways and their analogues : (1) the com- 
bination of effort; (2) the separation of effort — Illustrations: 
of building houses, of joint-stock companies, etc, — Of sailing a 
boat — The principle shown in naval architecture — The Erie 
Canal — The baking of bread — Production requires conscious 
thought — The same principle in mental effort — What is on 
the one side separation is on the other concentration — Extent 
of concentration and specialization of work in modern civiliza- 
tion — The principle of the machine — Beginning and increase 
of division of labor — Adam Smith's three heads — A better 
analysis 371 



320 CONTENTS OF BOOK III. 

CHAPTER X. 
COOPERATION — ITS TWO KINDS. 

SHOWING THE TWO KINDS OF COOPERATION, AND HOW THE 
POWEB OF THE ONE GREATLY EXCEEDS THAT OF THE OTHER. 

PAGE 

The kind of cooperation wMch, as to method of union or how of 
initiation, results from without and may be called directed 
or conscious cooperation — Another proceeding from within 
which may be called spontaneous or unconscious cooperation 
— Types of the two kinds and their analogues — Tacking of a 
full-rigged ship and of a bird — Intelligence that suffices for 
the one impossible for the other— The savage and the ship- 
Unconscious cooperation required in ship-building — Conscious 
cooperation will not suffice for the work of unconscious — The 
fatal defect of socialism — The reason of this is that the power 
of thought is spiritual and cannot be fused as can physical 
force — Of "man power "and "mind power" — Illustration from 
the optician — Impossibility of socialism — Society a Leviathan 
greater than that of Hobbes 382 

CHAPTER XI. 
THE OFFICE OF EXCHANGE IN PRODUCTION. 

SHOWING THAT IN MAN THE LACK OF INSTINCT IS SUPPLIED 
BY THE HIGHER QUALITY OP REASON, WHICH LEADS TO EX- 
CHANGE. 

The cooperation of ants and bees is from within and not from 
without ; from instinct and not from direction — Man has little 
instinct ; but the want supplied by reason — Reason shows 
itself in exchange — This suffices for the unconscious coopera- 
tion of the economic body or Greater Leviathan — Of the three 
modes of production, exchanging is the highest — Mistake of 
writers on political economy — The motive of exchange . . 397 

CHAPTER XII. 
OFFICE OF COMPETITION IN PRODUCTION. 

SHOWING THAT COMPETITION BRINGS TRADE, AND CONSE- 
QUENTLY SERVICE, TO ITS JUST LEVEL. 

"Competition is the life of trade," an old and true adage — The 
assumption that it is an e\il springs from two causes — one 
bad, the other good —The bad cause at the root of protection- 
ism — Law of competition a natural law — Competition neces- 
sary to civilization 402 



CONTENTS OF BOOK III. 321 



CHAPTER XIII. 

PAGE 

OF DEMAND AND SUPPLY IN PRODUCTION 404 



CHAPTER XIV. 
ORDER OF THE THREE FACTORS OF PRODUCTION. 

SHOWING THE AGREEMENT OF ALL ECONOMISTS AS TO THE 
NAMES AND ORDER OP THE FACTORS OF PRODUCTION. 

Land and labor necessary elements in production — Union of a 
composite element, capital — Reason for dwelling on this agree- 
ment as to order 405 



CHAPTER XV. 
THE FIRST FACTOR OP PRODUCTION— LAND. 

SHOWING THAT LAND IS THE NATURAL OR PASSIVE FACTOR 
IN ALL PRODUCTION. 

The term land— Landowners — Labor the only active factor . 408 



CHAPTER XVI. 
THE SECOND FACTOR OP PRODUCTION— LABOR. 

SHOWING THAT LABOR IS THE HUMAN OR ACTIVE FACTOR 
IN ALL PRODUCTION. 

The term labor — It is the only active factor in producing wealth, 
and by nature spiritual 411 

CHAPTER XVII. 
THE THIRD FACTOR OF PRODUCTION— CAPITAL. 

SHOWING THAT CAPITAL IS NOT A PRIMARY FACTOR, BUT PROCEEDS 
FROM LAND AND LABOR, AND IS A FORM OR USE OF WEALTH. 

Capital is essentially labor raised to a higher power — Where it 
may, and where it must aid labor — In itself it is helpless . 413 



CHAPTER I.i 
THE MEANING OF PRODUCTION. 

SHOWING THE MEANING AND PROPER USE OF PRODUCTION. 

Production a drawing forth of what before exists— Its difference from 
creation— Production other than of wealth— Includes all stages 
of bringing to be— Mistakes as to it. 

THE word production comes from the Latin, pro, be- 
fore, and d'ucere, to draw, and its literal meaning is 
a drawing forth. 

Production, as a term of political economy, means a 
drawing forth by man ; a bringing into existence by the 
power of man. It does not mean creation, the proper 
sense of which is the bringing into existence by a power 
superior to that of man— that power namely which to 
escape negation our reason is compelled to postulate as 
the final cause of aU things. 

A solar system, a world with aU the substances and 
powers therein contained, soil, water and aii*, chemical 
affinities, vital forces, the invariable sequences which we 
term natural laws, vegetables and animals in their species 
as they exist irrespective of the modifying influence of 
man, and man himself with his natural powers, needs and 
impulses, we properly speak of as created. How precisely 

1 No introdiiction or motto supplied for Book III. in MS. — H. 0., Jr. 
323 



324 THE PEODUCTION OF WEALTH. Book III. 

they came to be, and what and whence the originating 
impulse, we cannot tell, and probably in the sphere to 
which we are confined in this life can never know. All 
we can say with certainty, is that they cannot have been 
brought into existence by any power of man; that they 
existed before man was, and constitute the materials and 
forces on which his existence depends and on which and 
from which all his production is based. Since they cannot 
have come from what we call matter alone ; nor from what 
we call energy alone ; nor yet from any lanion of these two 
elements alone, they must proceed primarily from that 
originating element that in the largest analysis of the 
world that reason enables us to make we distinguish from 
matter and energy as spirit. 

Nothing that is created can therefore in the politico- 
economic sense be said to be produced. Man is not a 
creator ; he has no power of originating things, of making 
something out of nothing. He is a producer; that is to 
say a changer, who brings forth by altering what already 
is. All his making of things, his causing things to be, is 
a drawing forth, a modification in place or relation, and in 
accordance with natural laws which he neither originated 
nor altered, of what he finds already in existence. All his 
production has as its substratum what he finds already in 
the world ; what exists irrespective of him. This substra- 
tum or nexus, the natural or passive factor, on which and 
by which the human or active factor of production acts, 
is in the terminology of political economy called land. 

It is to be noted that when used as a term of political 
economy the word " production " has in some respects a 
narrower, and in some respects a wider, meaning than is 
often, in common use properly enough, attached to it. 
Since the production with which political economy pri- 
marily deals is the production of wealth, the economic term 
production refers to that. But it is important to bear in 



Cliap. I. THE MEANING OF PEODUCTION. 325 

mind that the production of wealth is not the only kind of 
production. 

I have alluded to this fact before in Chapter XVIII. of 
Book II. Let me speak of it again. 

I black my boots ; I shave my face ; I take a violin and 
play on it, or expend effort in learning to do so ; I write a 
poem ; or observe the habits of bees ; or try to make an 
hour pass more agreeably to a sick friend by reading to 
him something which arouses and pleases his higher na- 
ture. In such ways I am satisfying wants or gratifying 
desires, cultivating powers or increasing knowledge, either 
for myseK or for others. But I am not producing wealth. 
And so, those who in the cooperation of efforts in which 
civilization consists devote themselves to such occupations 
—boot-blacks, barbers, musicians, teachers, investigators, 
surgeons, nurses, poets, priests— do not, strictly speaking, 
take part in the production of wealth. Yet it may be mis- 
leading to speak of them as non-producers, without care 
as to what is reaUy meant. Though not producers of 
wealth, they are yet producers, and often producers of the 
highest kind. They are producers of utilities and satisfac- 
tions ; and as such are not only producers of that to which 
wealth is but a means, but may indirectly aid in the pro- 
duction of wealth itself. 

On the other hand there is something we should note. 

In common speech, the word production is frequently 
used in a sense which distinguishes the first from the later 
stages of wealth-getting ; and those engaged in the primary 
extractive or formative processes are often styled pro- 
ducers, as distinguished from transporters or exchangers. 
This use of the word production may be convenient 
where we wish to distinguish between separable functions, 
but we must be careful not to import it into our habitual 
use of the economic term. In the economic meaning of 
the term production, the transporter or exchanger, or any 



326 THE PEODUCTION OF WEALTH. Booh III. 

one engaged in any sub-division of those functions, is as 
truly engaged in production as is the primary extractor 
or maker. A newspaper-carrier or the keeper of a news- 
stand would for instance in common speech be styled a 
distributor. But in economic terminology he is not a dis- 
tributor of wealth, but a producer of wealth. Although 
his part in the process of producing the newspaper to the 
final receiver comes last, not first, he is as much a producer 
as the paper-maker or type-founder, the editor or com- 
positor or press-man. 

For the object of production is the satisfaction of 
human desires, that is to say it is consumption ; and this 
object is not made cajDable of attainment, that is to say, 
production is not really complete, until wealth is brought 
to the place where it is to be consumed and put at the dis- 
posal of him whose desire it is to satisfy. 

Thus, the production of wealth in political economy in- 
cludes transportation and exchange. The distribution of 
wealth, on the other hand, has in economic phraseology no 
relation to transportation or exchange, but refers, as we 
shall see when we come to treat of it, to the division of 
the results of production. 

This fact has been ignored by the great majority of 
professed economists who with few exceptions treat of 
exchange under the head of the distribution of wealth in- 
stead of giving it its proper place under the head of the 
production of wealth. 



CHAPTER 11. 
THE THREE MODES OF PRODUCTION. 

SHOWING THE COIUMON CHARACTER, YET DIFFERENT MODES 
OF PRODUCTION. 

Production involves change, brought about by conscious will— Its 
three modes : (1) adapting, (2) growing, (3) exchanging— This the 
natural order of these modes. 

ALL production results from human exertion upon ex- 
XX ternal natui'e, and consists in tlie changing in place, 
condition, form or combination of natural materials or 
objects so as to fit them or more nearly fit them for the 
satisfaction of human desires. In all production use is 
made of natural forces or potencies, though in the first 
place, the energy in the human frame is brought under the 
direct control of the conscious human will. 

But production takes place in different ways. If we 
run over in mind as many examples as we can think of in 
which the exertion of labor results in wealth— either in 
those primary or extractive stages of production in which 
what before was not wealth is made to assume the charac- 
ter of wealth ; or in the later or secondary stages, in which 
an additional value or increment of wealth is attached to 
what has already been given the character of wealth— 
we find that they fall into three categories or modes. 

The first of these three modes of production, for both 
reason and tradition unite in giving it priority, is that in 

327 



328 THE PRODUCTION OF WEALTH. Booh III. 

whieli, in the changes he brings about in natural substances 
and objects, man makes use only of those natural forces 
and potencies which we may conceive of as existing or 
manifesting themselves in a world as yet destitute of life ; 
or perhaps it might afford a better illustration to say, in 
a world from which the generative or reproductive prin- 
ciple of life had just departed, or been by his condition 
rendered unutilizable by man. These would include aU 
such natural forces and potencies as gravitation, heat, 
light, electricity, cohesion, chemical attractions and repul- 
sions—in short, all the natural forces and relations, that 
are utilized in the production of wealth, below those 
incident to the vital force of generation. 

We can perhaps best imagine such a separation of natural 
forces by picturing to ourselves a Robinson Crusoe thrown 
upon a really desert island or bare sand key, in a ship 
abundantly supplied with marine stores, tools and food so 
dried or preserved as to be incapable of growth or repro- 
duction. We might also, if we chose, imagine the ship to 
contain a dog, a goat, or indeed any number of other ani- 
mals, provided there was no pairing of the sexes. We 
cannot, in truth, imagine even a bare sand key, in which 
there should be no manifestation of the generative prin- 
ciple, in insects and vegetables, if not in the lower forms 
of fish and bird life, but we can readily imagine that our 
Robinson might not understand, or might not find it con- 
venient, to avail himseK of such manifestations of the 
reproductive principle. Yet without any use of the prin- 
ciple by which things may be made to grow and increase, 
such a man would still be able to produce wealth, since 
by changing in place, form or combination what he found 
already in existence in his island or in his ship, he could 
fit them to the satisfaction of his desires. Thus he could 
produce wealth just as De Foe's Robinson Crusoe, whose 
solitary life so many of us have shared in imagination, 



Chap. II. THE THREE MODES OF PRODUCTION. 329 

produced wealth when he first landed, by bringing desir- 
able things from the wrecked ship to the safety of the 
shore before destructive gales came on, and by changing 
the place and form of such of them as were fit for his 
purpose, making himself a cabin, a boat, sails, nets, clothes, 
and so on. In the same way, he could catch fish, kill or 
snare birds, capture turtles, take eggs, and convert the 
food-mate]-ial at his disposal into more toothsome dishes. 
Thus without growing or breeding anything he could get 
hj his labor a hving, until death, or the savages, or an- 
other ship came. 

For this mode of production, which is mechanical in its 
nature, and consists in the change in place, form, condition 
or combination of what is already in existence, it seems to 
me that the best term is " adapting." 

This is the mode of production of the fisherman, the 
hunter, the miner, the smelter, the refiner, the mechanic, 
the manufacturer, the transporter ; and also of the butcher, 
the horse-breaker or animal-trainer, who is not also a 
breeder. We use it when we produce wealth by taking 
coal from the vein and changing its place to the surface 
of the earth ; and again when we bring about a further 
increment of wealth by carrying the coal to the place 
where it is to be consumed in the satisfaction of human 
desire. "We use this mode of production when we convert 
trees into lumber, or lumber into boards ; when we con- 
vert wheat into flour, or the juice of the cane or beet into 
sugar; when we separate the metals from the combina- 
tions in which they are found in the ores, and when we 
unite them in new combinations that give us desii'able 
alloys, such as brass, type-metal. Babbitt metal, aluminum, 
bronze, etc. ; or when by the various processes of separat- 
ing and re-combining we produce the textile fabrics, and 
convert them again into clothes, sails, bags, etc. ; or vv^hen 
by bringing their various materials into suitable forms 



330 THE PRODUCTION OF WEALTH. Booh III. 

and combinations, we construct tools, machines, ships or 
houses. In fact, all that in the narrower sense we usually 
can " making," or, if on a large scale, " manufacturing," is 
brought about by the application of labor in this first mode 
of production— the mode of " adapting." 

In the Northwest, however, they speak sometimes of 
•' manufacturing wheat ; " in the West of '^ making hogs," 
and in the South of " making cotton" (the fiber) or "making 
tobacco" (the leaf). But in such local or special sense 
the words manufacturing or making are used as equiva- 
lent to producing. The sense is not the same, nor is 
the suggested action in the same mode, as when we prop- 
erly speak of flour as being manufactured, or of bacon, 
cotton cloth or cigars being made. Wonderful machines 
are indeed constructed by man's power of adaptation. But 
no extension of this power of adaptation will enable him 
to construct a machine that wiU feed itself and produce 
its kind. His power of adapting extended infinitely would 
not enable him to manufacture a single wheat-grain that 
would sprout, or to make a hog, a cotton-boll or a tobacco- 
leaf. The tiniest of such things are as much above man's 
power of adapting as is the ''making" of a world or the 
"manufacture" of a solar system. 

There is, however, another or second mode of produc- 
tion. In this man utilizes the vital or reproductive force 
of nature to aid him in the producing of wealth. By ob- 
taining vegetables, cuttings or seeds, and planting them ; 
by capturing animals and breeding them, we are enabled 
not merely to produce vegetables and animals in greater 
quantity than Nature spontaneously offers them to our 
taking, but, in many cases, to improve their quality of 
adaptability to our Tises. This second mode of production, 
the mode in which we make use of the vital or generative 
power of nature, we shall, I think, best distinguish from 
the first, by calling it " growing." It is the mode of the 



Clmp.II. THE THREE MODES OF PRODUCTION. 331 

farmer, the stock-raiser, the florist, the bee-keeper, and to 
some extent at least of the brewer and distiller. 

And besides the first mode, which we have called " adapt- 
ing," and the second mode, which we have called " grow- 
ing," there is still a third mode in which, by men living in 
civilization, wealth is produced. In the first mode we 
make use of powers or qualities inherent in all material 
things ; in the second we make use of powers or qualities 
inherent in all hving things, vegetable or animal. But 
this third mode of production consists in the utilization of 
a power or principle or tendency manifested only in man, 
and belonging to him by virtue of his peculiar gift of 
reason — that of exchanging or trading. 

That it is by and through his disposition and power to 
exchange, in which man essentially differs from all other 
animals that human advance goes on, I shall hereafter 
show. Yet not merely is it through exchange that the 
utilization in production of the highest powers both of the 
human factor and the natural factor becomes possible, but 
it seems to me that in itself exchange brings about a per- 
ceptible increase in the sum of wealth, and that even if 
we could ignore the manner in which it extends the power 
of the other two modes of production, this constitutes it, 
in itself, a third mode of production. In the Yankee story 
of the two school-boys so cute at a trade that when locked 
in a room thej^ made money by swapping jack-knives, 
there is the exaggeration of a truth. Each of the two 
parties to an exchange aims to get, and as a rule does get, 
something that is more valuable to him than what he 
gives— that is to say, that represents to him a greater 
power of labor to satisfy desire. Thus there is in the 
transaction an actual increase in the sum of wealth, an 
actual production of wealth. A trading- vessel, for in- 
stance, penetrating to the Arctic, exchanges fish-hooks, 
harpoons, powder and guns, knives and mirrors, green 



332 THE PRODUCTION OF WEALTH. Booh III. 

spectacles and mosquito-nets for peltries. Each party to 
the exchange gets in return for what costs it compara- 
tively little labor what would cost it a great deal of labor 
to get by either of the other modes of production. Each 
gains by the act. Eliminating transportation, which be- 
longs to the first mode of production, the joint wealth of 
both parties, the sum of the wealth of the world, is by the 
exchange itself increased. 

This third mode of production let us call '■'■ exchanging." 
It is the mode of the merchant or trader, of the store- 
keeper, or as the English who still live in England call him, 
the shopkeeper ; and of all accessories, including in large 
measure transporters and their accessories. 

We thus have as the three modes of production : 

(1) Adapting; 

(2) Growing; 

(3) Exchanging. 

These modes seem to appear and to assume importance 
in the development of human society much in the order 
here given. They originate from the increase of the de- 
sires of men with the increase of the means of satisfying 
them under pressure of the fundamental law of political 
economy, that men seek to satisfy their desires with the 
least exertion. In the primitive sta,ge of human life the 
readiest way of satisfying desires is by adapting to human 
use what is found in existen-ce. In a later and more settled 
stage it is discovered that certain desires can be more 
easily and more fully satisfied by utilizing the principle of 
growth and reproduction, as by cultivating vegetables and 
breeding animals. And in a still later period of develop- 
ment, it becomes obvious that certain desires can be better 
and more easily satisfied by exchange, which brings out 
the principle of cooperation more fully and powerfully 
than it could obtain among unexchanging economic units. 



CHAPTER III. 
POPULATION AND SUBSISTENCE. 

SHOWING THAT THE THEORY OF A TENDENCY EST POPULATION 
TO INCREASE FASTER THAN SUBSISTENCE HAS PREVIOUSLY 
BEEN EXABHNED AND CONDEIMNED. 

The Malthusian theory— Discussed in "Progress and Poverty." 

IN proceeding to consider the laws of the production of 
wealth it would be expedient first to consider any nat- 
ural law, if such there should be, which would limit the 
operation of man in production. In the Malthusian theory 
the scholastic political economy has held that there is a 
law of nature that produces a tendency in population to 
increase faster than subsistence. This, coming as it did, 
in the formative period of the institution of the science, 
was really the bulwark of the long-accepted political econ- 
omy, which gave to the wealthy a comfortable theory for 
putting upon the Originating Spirit the responsibility for 
all the vice, crime and suffering, following from the unjust 
actions of men, that constitute the black spot of our nine- 
teenth-century civilization. Falling in with the current 
doctrine that wages are determined by the ratio between 
capital and labor, deriving support from the principle 
brought prominen tly forward in current discussions of the 
theory of rent, that past a certain point the application of 
capital and labor to land yields a diminishing return, and 

333 



334 THE PEODUCTION OF WEALTH. BooTc III. 

harmonizing with the theory of the development of species 
by selection, it became of the utmost importance, and for 
a long time imposed even upon well-disposed and fair- 
minded men a weight of authority of which they could 
not rid themselves. But in ''Progress and Poverty" I 
devoted to it an entu-e Book, consisting of four chapters. 
In this, with what follows, I so disposed of the theory that 
it is not necessary to go over the reasoning again, but can 
refer to my previous work those who may wish to inquire 
as to the nature, grounds and disproof of that theory. 

As the space of that work did not allow me to go over 
the whole scope of political economy, but only to cover its 
more salient points, it will be well here to examine, what 
I did not do thoroughly in that work, the doctrine of the 
law of diminishing returns in agriculture. Since this doc- 
trine has not yet to my knowledge been questioned, it 
will be well to do this thoroughly. 



CHAPTER IV. 

THE ALLEGED LAW OF DIMINISHING RETURNS 
IN AGRICULTURE. 

SHOWING WHAT THIS ALLEGED LAW IS. 

John Stuart Mill quoted as to the importance, relations and nature 
of this law— The reduciio ad aisurdum by which it is proved— 
Contention that it is a misapprehension of the universal law of 
space. 

lEFORE proceeding to the subject of cooperation it is 
necessary to consider, if bnt to clear the way, what 
is treated in standard economic works since the time of 
Adam Smith as the most important law of production, 
and indeed of political economy as a whole. This is what 
is caUed " The Law of Diminishing Production," or more 
fuUy and exactly, '' The Law of Diminishing Returns in 
Agriculture." Of it John Stuart Mill ("Principles of 
Political Economy," Book I., Chapter XII., Sec. 2) says : 

This general law of agricultural industry is the most important 
proposition in Political Economy. Were the law different nearly all 
the phenomena of the production and distribution of wealth would 
be other than they are. 

This view of the importance of " the law of diminishing 
returns in agriculture" pervades the standard political 
economies, and is held by the most recent scholastic writers, 
such as Professor Walker of the United States and Pro- 

335 



336 THE PEODUCTION OF WEALTH. Book III. 

f essor Marshall of England, as by Mill and his predecessors. 
It arises from the relation of this alleged law to current 
apprehensions of the law of rent, and especially from the 
support which it seems to give to the Malthusian doctrine 
that population tends to outrun subsistence— a support 
to which the long acceptance of that doctrine is due. 

Thus, as the necessary consequence of this "law of 
diminishing returns in agriculture," John Stuart Mill in 
Book I., Chapter XIII., Sec. 2, of his " Principles of Politi- 
cal Economy," says : 

In all countries which have passed beyond a rather early stage in 
the progress of agriculture, every increase in the demand for food, 
occasioned by increased population, will always, unless there is a 
simultaneous improvement in production, diminish the share which 
on a fair division would fall to each indi^ddual. . . . From this, 
results the important eoroUary, that the necessity of restraining 
population is not, as many persons believe, peculiar to a condition 
of great inequality of property. A greater number of people cannot, 
in any given state of civilization be collectively so well pro\dded for 
as a smaller. The niggardliness of natm'e, not the injustice of 
society, is the cause of the penalty attached to overpopulation. An 
unjust distribution of wealth does not even aggravate the evil, but 
at most causes it to be somewhat earlier felt. It is in vain to say, 
that all mouths which the increase of mankind calls into existence 
bring with them hands. The new mouths require as much food as 
the old ones, and the hands do not produce as much. 

As to the law itself, from which such tremendous conse- 
quences are confidently deduced— consequences which put 
us to the mental confusion of denpng the justice of the 
Creator, and assuming that the Originating Spirit is so 
poor a contriver as to be constantly doing what any mere 
human host would be ashamed to be guilty of, bringing 
more guests to his table than could be fed— it is thus 
stated by Mill : 

After a certain and not very advanced stage in the progress of 
agriculture ; as soon, in fact, as mankind have applied to cultivation 



Clun). IV. OF DIMINISPIING EETUENS. 337 

with any energy, and have brought to it any tolerable tools ; from 
that time it is the law of production from the land, that in any given 
state of agricultural skill and knowledge, by increasing the labor, the 
produce is not increased in equal degree ; doubling labor does not 
increase the produce ; or to express the same thing in other words, 
every increase of produce is obtained by a more than proportional 
increase in the application of labor to the land. 

This law of diminishing returns in agriculture it is 
further explained applies also to mining, and in short to 
all the primary or extractive industries, which give the 
character of wealth to what was not before wealth, but 
not to those secondary or subsequent industries which add 
an additional increase of wealth to what was already 
wealth. Thus since the law of diminishing productiveness 
in agriculture does not apply to the secondary industries, 
it is assumed that any increased application of labor (and 
capital) in manufacturing for instance, would continue to 
yield a proportionate and more than proportionate return. 
And as conclusive and axiomatic jDroof of this law of di- 
minishing productiveness in agriculture, it is said that 
were it not for this peculiar law, and were it, on the con- 
trary (as it is assumed it would be without it), the fact 
that additional application of labor would result in a pro- 
portionately increased production from the same land, 
one single farm would suffice to raise all the agricultm-al 
produce required to feed the whole population of England, 
of the United States or any other country, or of course, 
of the whole world, by mere increase in the application of 
labor. 

This proposition seems to have been generally accepted 
by professional economists as a valid reductio ad cd)si<rdiwi, 
and to have carried the same weight in the common 
thought as has the similar proposition of the general 
Malthusian doctrine that if increasing population did not 
find increasing diflficulty in getting subsistence, mankind 



338 THE PRODUCTION OF WEALTH. Booklll. 

would in a little while be able only to find standing-room 
on one another's heads. 

But analysis will show that this logical structure, which 
economic writers have deemed so strong and on which 
they have so confidentiy built, rests upon an utter misap- 
prehension ; that there is in truth no special law of dimin- 
ishing productiveness applying to agriculture, or to the 
extractive occupations, or to the use of natural agents, 
which are the various ways which the later writers have 
of sometimes stating what the earlier writers called the law 
of diminishing productiveness in agriculture; and that 
what has been misapprehended as a special law of dimin- 
ishing returns in agriculture is in reality a general law, 
applying as well to manufacturing and exchanging as to 
agriculture, being in fact nothing less general than the 
spacial law of all material existence and movement— inor- 
ganic as well as organic. 

This will appear if we consider the relation of space to 
production. But to do this thoroughly and at the same 
time to clear the way for considerations which may prove 
of importance in other parts of this work, I propose to 
begin by endeavoring to fix the meaning and nature of 
space and time. 



CHAPTER V. 
OF SPACE AND TIME. 

SHOWING THAT HUMAN REASON IS ONE, AND SO FAR AS IT 
CAN GO ]\IAY BE RELIED ON. 

Purpose of this work— Of metaphysics— Danger of thinking of words 
as things— Space and time not conceptions of things but of rela- 
tions of things— They cannot, therefore, have independent begin- 
ning or ending— The verbal habit which favors this idea— How 
favored by poets and by religious teachers— How favored by phi- 
losophers—Of Kant— Of Schopenhauer— Mysteries and antino- 
mies that are really confusions in the meaning of words— Human 
reason and the eternal reason— "Philosophers" who are really 
word- jugglers. 

MY purpose in this work is to explain the science of 
political economy so clearly that it may be under- 
stood by any one of common ability who will give to it 
reasonable attention. I wish therefore to avoid, as far 
as possible, everything that savors of metaphysics. For 
metaphysics, which in its proper meaning is the science of 
the relations recognized by human reason, has become in 
the hands of those who have assumed to teach it, a syno- 
nym for what cannot be understood, conveying to common 
thought some vague notion of a realm beyond the bounds 
of ordinary reason, into which common sense can venture 
only to shrink helpless and abashed. 

Yet to trace to their root confusions involved in current 
economic teachings and to clear the ground for a coherent 

339 



340 THE PEODUCTION OF WEALTH. Boole III. 

political economy, it is necessary to fix tlie real meaning 
of two conceptions which belong to metaphysics, and which 
are beset by confusions that have not only disturbed the 
teaching of political economy, but of philosophy in the 
higher sense. These conceptions are those of space and 
time. 

All material existence is in space and in time. Hence, 
the production of wealth, which in all its modes consists in 
the bringing about by human exertion of changes in the 
place or relation of material things, so as to fit them for 
the satisfaction of human desire, involves both space and 
time. 

This may seem like a truism— a fact so self-evident as 
not to need statement. But much disquisition has been 
wasted and much confusion caused by the failure of econ- 
omists to keep this in mind. Hence, to start from firm 
foundations, we must see clearly what is realty meant by 
space and time. Here we come into the very heart of 
metaphysics, at a x)oint where the teachings of what passes 
for the highest philosophy are most perplexed and per- 
plexing. 

In asking ourselves what we really mean by space and 
time, we must have a care, for there is a danger that the 
habitual use of words as instruments of thought may lead 
to the error of treating what they express as objects of 
thought, or things, when they really express not things, 
but only the qualities or relations of things. This is one 
of tliose sources of error which Bacon in his figurative 
classification called Idols of the Forum. Though a word 
is a thing, in the sense that its verbal form may be made 
an object of thought, yet all words are not things in the 
sense of representing to the mind what apart from mere 
verbal form may be made an object of thought. To clothe 
in a form of words which the eye and ear may distinguish 
from other words, yet which in their meaning involve con- 



Chap. V. OF SPACE AND TIME. 341 

tradictions, is not to make a thing, which in itself, and 
aside from that mere verbal form, can be thought of. To 
give a name to a form of words inipl3'ing contradictions 
is to give name to what can be thought of only verbally, 
and which in any deeper sense than that is a negation— 
that is to say, a no thing, or nothiug. 

Yet this is the trick of much that to-day passes for the 
most profound philosophy, as it was the trick of Plato and 
of much that he put into the mouth of Socrates. To try 
it, make up a word signifying opposite qualities, such as 
''lowhigh" or " squareround," or a phrase without think- 
able meaning, such as a '' fourth dimension of space." In 
this it will be wisest to use a tongue which being foreign 
to the vernacular is suggestive of learning. Latin or 
Greek, has long been used for this pm-pose, but among 
English-speaking people German will now do as well if not 
better, and those who call themselves Theosophists have 
taken Sanskrit or what they take to be Sanskrit very satis- 
factorily. Now, if you have the external associations of 
superior penetration, and will persist for a while in seem- 
ing to treat your new word or phrase as if you were really 
making it an object of deep thought, you will soon have 
others persuading themselves to think that they also can 
think of it, until finally, if it get the scholastic vogue, the 
man frank enough to say that he can get no meaning from 
it will be put down as an ignorant fellow whose education 
has been neglected. This is really the same trick as stand- 
ing on a street and gazing into the sky, as if you saw- 
something unusual there, until a crowd gathers to look 
also. But it has made great reputations in philosophy. 

Now, in truth, when we come to analyze our apprehen- 
sions of space and time, we see that they are conceptions, 
not of things in themselves existing, but of relations which 
things in themselves existing may hold to each other — 
space being a relation of extension or place between one 



342 THE PKODUCTION OF WEALTH. Boole III. 

thing and other things, such as far or near, hither or 
thither ; and time being a relation of succession between 
one thing and other things, such as before or after, now 
and then. To think of space we must necessarily think 
of two points in place, and to make the relation of exten- 
sion between them intelligible to our minds, we must also 
think of a third point which may serve as a measure of 
this relation. To think of time we must necessarily think 
of two points in appearance or disappearance, and to make 
this relation of sequence between them intelligible to our 
minds, we must also think of some third point which may 
serve as a measure of this relation. 

Since space and time are thus not existences, but ex- 
pressions of the relation to each other of things thought 
of as existing, we .cannot conceive of their having begin- 
ning or ending, of their creation or annihilation, as apart 
from that of the things whose relation they express. Space 
being a relation of extension between things in place, and 
time a relation of succession between things in order of 
appearance or duration, the two words properly express 
relations which, like the relations of form and number 
with which mathematics deals in its two branches of ge- 
ometry and arithmetic, are expressive of actual relation 
wherever the things they relate to have actual existence, 
and of potential relation wherever the things they relate 
to have merely potential existence. We cannot think of a 
when or where in whicli a whole was not equal to the sum 
of its parts, or will ever cease to be ; or in which the lines 
and angles of a square were not, or can ever cease to be, 
equal to each other; or in which the three angles of a 
triangle were not, or can ever cease to be, equal to two 
right angles. Nor yet can we think of a when or where 
in which twice one did not make two, or can ever cease to 
do so ; and twice two did not, or will ever cease to, make 
four. In the same way it is utterly impossible for us to 



Chaj3. r. OF SPACE AND TIME. 343 

think of a when or where in which space and time could 
begin or could end, as apart from the beginning or ending 
of the things whose relations to each other they express. 
To try to think of space and time without a presumption 
of things whose relations to each other are thus expressed, 
is to try to think of shadow without reference to substance. 
It is to try to think of a no thing, or nothing— a negation 
of thought. 

This is perfectly clear to us when we attach an article 
to the noun and speak of " a space " or '^ the space," or of 
'' a time " or " the time," for in such speech the relation of 
one thing or set of things to another thing or set of things 
is expressed by some such preposition as ''from," "before," 
"after" or "when." But when the noun is used without 
the article, and men speak of space by itself and time by 
itself without any word of particularization or preposition 
of relation, the words have by the usage of oui* English 
tongue the meaning of all space or space in general, or 
all time or time in general. In this case the habit of re- 
garding words as denoting things in themselves existing 
is apt to lead us to forget that space and time are but 
names for certain relations in which things stand to each 
other, and to come to regard them as things which in them- 
selves, and apart from the things whose relationship they 
express, can become objects of thought. Thus, without 
analyzing the process, v^e come to accept in our minds the 
naked words as representing some sort of material exis- 
tences—vaguely picturing space as a sort of atmosphere or 
ether, in which all things swim, and time an ever-flowing 
cmTcnt which bears all things on. 

From this mode of mental picturing we are apt to assume 
that both space and time must have had beginning, before 
which there was no space and no time ; and must have 
limits, beyond which neither space nor time can be. But 
when we try to think of this beginning or of these limits, 



344 THE PEODUCTION OF WEALTH. BooJc III. 

we tldnk of sometliing wMch for the moment we assume 
to be the first or farthest of existing things. Yet no 
matter how far we may carry this assumption, we at the 
same moment see that it may be carried further still. To 
think of anything as fii'st, involves the possibility of think- 
ing of something before that, to which our momentary 
first would become second. To think of an utmost star 
in the material universe, involves the possibility of think- 
ing of another star yet further still. 

Thus in the effort to grasp such material conceptions of 
time and space they inevitably elude us. From trying to 
think of what are only names for relations which things 
have to each other as if they were things in themselves, 
we come to a point not merely of confusion, but of nega- 
tion—a conflict of absolutely opposing ideas resembling 
that brought about in the minds of the unwary by the 
schoolmen's question as to what would happen did an 
irresistible force meet an immovable bod5^ 

Now, this way of using the nouns space and time 
without an article, as though they mean things in them- 
selves existing, has been much favored by the poets, whose 
use of words is necessarily metaphorical and loose. And 
it has been much favored by the teachers of religion, 
whose endeavor to embody spiritual truths tends to poet- 
ical expression, and who have been prone in all ages to 
make no distinction between the attribution to the higher 
power of what transcends ou.r knowledge and of what is 
opposed to our reason — assuming the repugnance of human 
reason to accept the contradictions to which they give the 
name of mysteries to be proofs of its weakness. 

Thus the habit of trying to think of space and time as 
things in themselves and not merely relations of things, 
has been embedded in religious literature, and in our most 
susceptible years we hear of beings who know not space 
or time, and of whens and wheres in which space and time 



Chaj). V. OF SPACE AND TIME. 345 

are not. And as the child recoils from the impossible at- 
tempt to think of the unthinkable and strives in vain to 
picture a when or where in which space and time have 
not been, or shall cease to be, he is hushed into silence 
by being told that he is impiously trying to measure with 
the shallow plummet of human reason the infinite depths 
of the Divine Mind. 

But the disposition of the theologians to find an insolv- 
able mystery in the contradiction that follows the attempt 
to think of space and time not as relations but as inde- 
pendent existences, has been followed or perhaps antici- 
pated by philosophers who in the use of meaningless words, 
as though to them they really conveyed coherent ideas, 
have assumed what has passed for superior penetration. 
They (or at least those of them who have looked down 
upon the theologians with contempt) have not, it is true, 
called the inevitable conflict in thought which arises when 
we try mentally to treat of what is really a relation as 
though it were in itself a thing, a divine mystery. But 
they have recognized this conflict as something inherent, 
not in confusion of words, but in the weakness of human 
reason— which human reason they themselves pretend to 
go behind and instruct. 

Kant, whose ponderous incomprehensibility is a striking 
example of what (whether it was before him or because of 
him) seems to have become a peculiarly German facility 
for inventing words handy for philosophic juggling, dig- 
nified tins point of assumed necessary conflict by calling 
it an " antinomy," which term suggesting in its derivation 
the idea of a conflict of laws, was employed by him to 
mean a self-contradiction or mutual destruction of una- 
voidable conclusions of the human reason ; a what must 
be thought of, yet cannot be thought of. Thus the word 
antinomy in the scholastic philosophy that has followed 
Kant takes the place of the word mystery in the tlieo- 



346 THE PEODUCTION OF WEALTH. Book III. 

logical philosophy, as covering the idea of a necessary 
irreconcilability of human reason. 

Kant, for instance, tells us that space and time are forms 
of human sensibility, which, as well as I can understand 
him, means that our mental nature imposes upon us the 
wearing of something like colored glasses, so that when 
we consider things they always seem to us to be in space 
and in time ; but that this is merely their appearance to 
us, and that '^ things in themselves," that is, things as they 
really exist outside of oui- sensibility or apprehension of 
them, or as they would be apprehended by ''pure reason" 
{i.e., some reason outside of human reason), are not in 
space and time at all. 

In a passage I have already quoted, the much more 
readable Schopenhauer speaks of the destruction of the 
capacity for thinking which results from the industrious 
study of a logomachy made up by monstrous piecings to- 
gether of words which abolish and contradict one another. 
But of this very thing, Schopenhauer himself with all his 
strength and brilliancy is a notable example. His indus- 
trious study of Kant had evidently reduced him to that 
state of mind of which he speaks, where " hollow phrases 
count with it for thoughts." His whole philosophy is 
based on Kant's " Critique of Pure Reason," which he 
speaks of as "the most important phenomenon that has 
appeared in philosophy for two thousand years," and a 
thorough understanding of which he declares in the be- 
ginning and over and over again to be absolutely neces- 
sary to an understanding of his own works. Likening the 
effect of Kant's writings on the mind to which they truly 
speak to that of the operation for cataract on a blind man, 
he adds : 

The aim of my own work may be described by saying that I have 
sought to put into the hands of those upon whom that operation has 
been successfully performed a pair of spectacles suitable to eyes that 



Chap. V. OF SPACE AND TIME. 347 

have recovered their sight— spectacles to whose use that operation is 
the absolutely necessary condition. 

And through these spectacles of " The Fourfold Root of 
the Principle of Sufficient Reason " and the chief work to 
which that is preliminary, " The World as Will and Idea," 
Schopenhauer introduces us into what seems to natural 
reason like a sort of philosophic '' Alice in Wonderland." 
If I can understand a man who seems to have a peculiar 
gift of lucid expression wherever it is applied to under- 
standable things, and whose writings are illumined by 
many acute observations and sagacious reflections, this 
world in which I find myself and which from the outside 
is so immense, so varied, so wonderful, is from the inside, 
nothing but "I, myself "—my idea, my presentment, my 
■will ; and space and time are only in my seeming, appear- 
ances imposed upon me bj'' the forms of my consciousness. 
I behold, for instance, a kitten, which by and by becomes 
a Ciit and has kittens of its own, and at the same time or 
at different times and places I see or remember to have 
seen many cats— tom-cats, pussy-cats, kitty-cats, black, 
white, gray, mottled and tortoise-shell cats, in different 
stages of age, from little cats whose eyes are not yet opened 
to decrepit cats that have lost their teeth. But in reality, 
on the inside of things as it were, there is only one cat, 
always existent without reference to time and space. This 
eternal cat is the idea of a cat, or cat idea, which is reflected 
in all sorts of guises in the kaleidoscopic facets of my ap- 
prehension. And as with cats, so with all things else in 
which this infinite and varied world presents itself to me 
—planets and suns, plants and trees, animals and men, 
matter and forces, phenomena and laws. All that I see, 
hear, touch, taste, smeU or otherwise apprehend— all is 
mirage, presentment, delusion. It is all the baseless fab- 
ric of a vision, the self-imposed apprehensions of the evil 
dream, containing necessarily more pain than pleasure, in 



348 THE PEODUCTION OF WEALTH. Booh III. 

which what we call life essentially consists ; yet which he 
who suffers in it cannot escape by suicide, since that only 
brin gs him into life again in other form and circumstance ; 
but from which the truly wise man must seek relief by 
starving himself to death without wanting to die ; or in 
other words by conquering "the will to live," the only 
road to the final goal of annihilation or Nirvana, to which 
all life ultimately tends. 

And this philosophy of negation, this nineteenth-cen- 
tury Buddhism without the softening features of its Asiatic 
prototype, that makes us but rats in an everlasting trap, 
and substitutes for God an icy devil, is the outcome of 
the impression made upon a powerful and brilliant but 
morbid mind by "the industrious study of a logomachy 
made up by monstrous piecings together of words which 
abolish and contradict one another," that strives to turn 
human reason as it were inside out and consider in the 
light of what is dubbed " pure reason " the outside-in of 
things. 

The fact is, that this seemingly destructive conflict of 
thought that theologians call a mystery and philosophers 
call an antinomy— and which there must be very many of 
my readers who like myself can remember puzzling over 
in childhood in questionings of what might be beyond the 
limits of space and time, and what was before God was, 
and what might be after space and time had ceased— is not 
in reality a failure of reason, but a confusion in the mean- 
ing of words. When we remember that by space and time 
we do not really mean things having existence but certain 
relations to each other of things that have existence, the 
mystery is solved and the antinomy disappears in the 
perception of a verbal confusion — a confusion of the same 
kind as perplexes those who try to think at once of an 
irresistible force and an immovable body, two terms which 
being mutually exclusive cannot together exist. 



Chap. V. OP SPACE AND TIME. 349 

There is a riddle about what a boy said, sometimes given 
among young people playing conundrums, which if not 
heard before, is almost certain to make the whole party 
" give it up," after trying all sorts of impossible answers, 
since its true and only possible answer, " The boy lied," is 
so obvious that they do not think of it. 

We may be wise to distrust our knowledge ; and, unless 
we have tested them, to distrust what we may call our 
reasonings ; but never to distrust reason itself. 

Even when we speak of lunacy or madness or similar 
mental afflictions as the loss of reason, analysis I think 
will show that it is not reason itself that is lost, but that 
those powers of perception and recollection that belong to 
the physical structure of the mind have become weakened 
or broken or dislocated, so that the things with which the 
reason deals are presented to it imperfectly or in wrong 
place or relation. 

In testing for glasses an optician will put on you lenses 
through which you will see the flame of a candle above or 
below or right or left of its true position, or as two where 
there is only one. It is so with mental diseases. 

And that the powers with which the human reason must 
work are limited and are subject to faults and failures, 
our reason itself teaches us as soon as it begins to examine 
what we find around us and to endeavor to look in upon 
our own consciousness. But human reason is the only 
reason that men can have, and to assume that in so far as 
it can see clearly it does not see truly, is in the man who 
does it not only to assume the possession of a superior to 
human reason, but it is to deny the validity of all thought 
and to reduce the mental world to chaos. As compared 
with the eternal reason which is manifested in the relations 
which we call laws of nature our human reason is clearlj^ 
shallow and narrow ; but that it is a perception and recog- 
nition of this eternal reason is perhaps the deepest fact of 



350 THE PEODUCTION OF WEALTH. Bool III. 

our certainty. Not as yet dreaming tliat this earth which 
seems to our first perceptions to be so fii-mly fixed could 
be in constant motion, men did not for a long time perceive 
what a closer and wider use of reason now shows to be the 
case, that the earth revolves around the sun, not the sun 
around the earth, and spoke with literal meaning of sunrise 
and sunset. But as to the phenomena of day and night, 
and as to the proximate cause of these phenomena being 
in the relations of sun and earth towards each other, they 
were not deceived. 

As for the philosophers since Kant or before him who 
profess to treat space and time as mere conditions of human 
perception, mental glasses, as it were, that compel us to 
recognize relations that do not in truth exist, they are mere 
jugglers with words, giving names such as ^' the absolute," 
" the unconditioned," '' the unknowable " to what cannot be 
thought of, and then proceeding to treat them as things, 
and to reason with them and from them. 



CHAPTER VI. 

CONFUSION OF THE SPACIAL LAW WITH 
AGRICULTURE. 

SHOWING THE GENESIS OF THIS CONFUSION. 

What space is — The place to which man is confined — Extension a 
part of the concept "land"— Perception is by contrast— Man's 
first use of land is by the mode of "adapting"— His second, and 
for a long time most important, use is by " growing "—The third, 
on which civilization is now entering, is "exchanging"— Political 
economy began in the second, and "growing'^ still attracts most 
attention— The truth and error of the Physiocrats— The succes- 
sors of Smith, while avoiding the error of the Physiocrats, also 
ignored theii- truth ; and with their acceptance of the Malthiisian 
theory, and Eicardo's explanation of rent as relating to agricul- 
tiu-al land, they fell into, and have continued the habit of treating 
land and rent as agrieultiu'al— Difficulty of the single tax in the 
United States. 

THE laws of our physical I)eing, to wMch I have already 
called attention (Book I., Chapter II.), confine us 
within narrow limits to that part of the superficies of our 
sphere where the ocean of air enveloping it meets the solid 
surface. We may venture temporarily a little below the 
solid surface, in caves and vaults and shafts and tunnels ; 
and a little above it, on trees, or towers, or in balloons or 
aerial machines, if such be yet constructed ; but with 
these temporary aerial extensions of our habitat, which of 
themselves require not only a preliminary but a recurring 
use of the solid surface of the earth, it is to that solid 

351 



352 THE PRODUCTION OF WEALTH. Boolclll. 

surface that our material existence and material produc- 
tion are confined. Physically we are air-breathing, light- 
requiring land animals, who for our existence and all our 
production require place on the dry surface of our globe. 
And the fundamental perception of the concept land— 
whether in the wider use of the word as that term of 
political economy signifying all that external nature offers 
to the use of man, or in the narrower sense which the word 
usually bears in common speech, where it signifies the 
solid surface of the earth— is that of extension; that of 
affording standing-place or room. 

But a fundamental perception is not always a first per- 
ception. Weight is a fundamental perception of air. 
But we reahze this only by the exertion of reason, and 
long generations of men have Kved, feeling the weight of 
air on every part of their bodies during every second of 
their lives from birth to death, without ever realizing that 
air has weight. Perception is by contrast. What we 
always perceive neither attracts attention nor excites 
memory until brought into contrast with non-perception. 

Even in the now short Atlantic trip the passenger be- 
comes so accustomed to the constant throb of the engines 
as not to notice it, but is aroused by the silence when it 
stops. The visitor in a nail-mill is so deafened that speech 
seems impossible ; but the men working there are said to 
talk to each other without difficulty and to find conversa- 
tion hard when they get again into the comparative silence 
of the street. In later years, I have at times '^ supped with 
Lucullus," without recalling what he gave me to eat, 
whereas I remember to this day the ham and eggs of my 
first breakfast on a canal-packet drawn by horses that 
actually trotted; how sweet hard-tack, munched in the 
middle watch while the sails slept in the trade-wind, has 
tasted ; what a dish for a prince was sea-pie on the rare 



Chajp. ri. CONFUSION OF THE SPACIAL LAW. 353 

occasions when a pig had been killed or a porpoise har- 
pooned ; and how good was the plum-duff that came to the 
forecastle only on Sundays and great holidays. I remember 
as though it were an hour ago, that talking to myself 
rather than to him, I said to a Yorkshii-e sailor on my first 
voyage, " I wish I were home, to get a piece of pie." 1 
recall his expression and tone, for they shamed me, as he 
quietly said, " Are you sure you would find a piece of pie 
there ? " Thoughtless as the French princess who asked 
why the people who were crying for bread did not try 
cake, '^Home" was associated in my mind with pie of 
some sort— apple or peach or sweet potato or cranberry 
or mince— to be had for the taking, and I did not for the 
moment realize that in many homes pie was as rare a 
luxury as plums in oui* sea-duff. 

Thus, while the fundamental quality of land is that of 
furnishing to men place on which they may stand or move, 
or rest things on, this is not the quality first noticed. As 
settlers in a wooded country, where every foot of land 
must be cleared for use, come to regard trees as a nuisance 
to be got rid of, rather than as the source of value that 
in the progress of civilization they afterwards become, so 
in that rude stage of social development which we are 
accustomed to think of as the primary condition of man- 
kind, where the mode of expending labor in production 
which most attracts attention is that we have called 
" adapting," land would be esteemed rich or poor accord- 
ing to its capacity of yielding to labor expended in this 
first mode, the fruits of the chase. 

In the next higher stage of social development, in which 
that second mode of production, which we have called 
"growing," begins to assume most importance in social 
life, that quality of land which generally and strongly 
attracts attention is that which makes it useful in agri- 



354 THE PEODUCTION OF WEALTH. BookllL 

culture, and land would be esteemed rich or poor accord- 
ing to its capacity for yielding to labor expended in the 
breeding of animals and raising of crops. 

But in the still higher stage of social development which 
what we now call the civilized world is entering, attention 
begins to be largely given to the third mode of production, 
which we have called " exchanging," and land comes to be 
considered rich or poor according to its capacity of yield- 
ing to labor expended in trading. This is already the case 
in our great cities, where enormous value attaches to land, 
not because of its capacity to provide wild animals to the 
hunter, nor yet because of its capacity to yield rich crops 
to the grower, but because of its proximity to centers of 
exchange. 

That the development of our modern economy began in 
what was still mainly the second stage of social develop- 
ment, when the use of land was usually regarded from the 
agricultural point of view, is it seems to me, the explanation 
of an otherwise curious way of thinking about land that 
has pervaded economic literature since the time of the 
Physiocrats, and that still continues to pervade the scho- 
lastic political economy — a way of thinking that leads 
economic writers to treat land as though it were merely a 
place or substance on which vegetables and grain may be 
grown and cattle bred. 

The followers of Quesnay saw that there is in the aggre- 
gate production of wealth in civilization an unearned in- 
crement—an element which cannot be attributed to the 
earnings of labor or capital— and they gave to this incre- 
ment of wealth, unearned so far as individuals are con- 
cerned, the name of product net or surplus product. They 
rightly traced this unearned or surplus product to land, 
seeing that it constituted to the owners of land an income 
or return which remained to them after all expenditure 
of labor and investment of capital in production had been 



C/mjx VL CONFUSION OF THE SPACIAL LAW. 355 

paid for. But they fell into error in assuming that what 
was indeed in their time and place the most striking and 
prominent use of land in production, that of agriculture, 
was its only use. And finding in agriculture, which falls 
into that second mode of production I have denominated 
" growing," the use of a power of nature, the germinative 
principle, essentially different from the powers utilized in 
that first mode of production I have denominated " adapt- 
ing," they, without looking further, jumped to the con- 
clusion that the unearned increment of wealth or surplus 
net sprang from the utilization of this principle. Hence 
they deemed agriculture the only productive occupation, 
and insisted in spite of the absurdity of it that manufac- 
tures and commerce added nothing to the sum of wealth 
above what they took from it, and that the agriculturist 
or cultivator was the only real producer. 

This weakness in the thinking of the Physiocrats and 
the erroneous terminology that it led them to use, finally 
discredited their true apprehensions and noble teachings, 
unpalatable as they necessarily were to the powerful 
interests who seemingly profit by social injustice, until 
the rise with the publication of '' Progress and Poverty" 
of the new Physiocrats, the modern Single Taxers as they 
now call themselves and are being called. 

But the economists who succeeded Adam Smith, whUe 
they avoided the error into which the Physiocrats had 
fallen, avoided as well the great truth of which this had 
been an erroneous apprehension, and greedily accepting 
the excuse which the Malthusian theory offered for putting 
upon the laws of God the responsibility for the misery and 
vice that flow from poverty, they feU into and have con- 
tinued the habit of regarding land solely from the agri- 
cultural point of view, thus converting what is reaUy the 
spacial law of all production into an alleged law of dimin- 
ishing production in agriculture. Even Ricardo, who 



356 THE PEODUCTION OF WEALTH. BooTcIII. 

truly though very narrowly explained the law of rent, 
shows in all his arguments and illustrations an inability 
to free himself from thinking of land as relating only to 
agriculture, and of rent only as agricultural rent. And 
although in England the relative importance of agriculture 
has during all this century steadily and rapidly declined, 
the habit of thinking of land as a place or substance for 
agricultui*al operations is still kept up. Not merely is the 
law of diminishing production in agriculture still taught 
as a special law of nature in the latest works treated as 
authoritative in colleges and universities, but in speaking 
of land and of rent, most English wi'iters will be found to 
have reaUy in mind agricultural land or agricultural rent. 
What is true of England is true of the United States 
except so far as the influence of the single tax has been 
felt. But the greatest difficulty which the single tax prop- 
aganda meets in the United States is the wide-spread 
idea, sedulously fostered by those who should know better, 
that non-agricultural workers have no interest in the land 
question and that concentrating taxes on land values 
means increasing the taxes of farmers. To fostering this 
fallacy all the efforts of the accredited organs of education 
are directed. 



CHAPTER VII. 
THE RELATION OF SPACE IN PRODUCTION. 

SHOWING THAT SPACE HAS RELATION TO ALL 
MODES OP PRODUCTION. 

Matter being material, space must have relation to all production— 
This relation readily seen in agriculture— The concentration of 
labor in agriculture tends up to a certain point to increase and 
then to diminish production — But it is a misapprehension to attrib- 
ute this law to agriculture or to the mode of "growing"— It 
holds in all modes and sub-divisions of these modes— Instances : 
of the production of brick, of the mere storage of brick— Man 
himself requires space— The division of labor as requiring space 
— Intensive and extensive use of land. 

PRODUCTION in political economy means the produc- 
tion of wealth. Wealth, as we have seen, consists in 
material substances so modified by human labor as to fit 
them for the satisfaction of human desires. Space, there- 
fore, which has relation to all matter, must have relation 
to aU production. 

This relation of space to aU production may be readily 
seen in agriculture, which is included in that mode of 
production we have called '' growing." In this, the con- 
centration of labor in space tends up to a certain point to 
increase the productiveness of labor; but the point of 
greatest productiveness attained, any further concentration 
of labor would tend to decrease productiveness. Thus, if 
a Robinson Crusoe, having a whole island on which to 

357 



358 THE PEODUCTION OF WEALTH. Booh III. 

expend his labor, were to plant potatoes, each cutting a 
hundred yards apart from every other cutting, he would 
necessarily waste so much labor in planting, cultivating 
and gathering the crop that the return compared with his 
exertion would be very small. He would get a much larger 
return were he to concentrate his labor by planting his 
potatoes closer; and this increase would continue as he 
continued to exert his labor in lesser space, until his plants 
became too crowded, and the growth of one would lessen 
or prevent that of another. While if he continued the 
experiment so far as to put all his cuttings in one spot he 
would get no greater return than he might have had from 
the planting of one, and perhaps no return at all. 

This spacial law of production holds good of course in 
labor exerted conjointly, as in labor exerted individually. 
On a given area, the application of labor to the growth of 
a crop or the breeding of animals may sometimes be 
increased with advantage, the exertion of two men pro- 
ducing more than twice as much as the exertion of one 
man ; that of four men, more than twice as much as the 
exertion of two ; and so on. But this increase of produc- 
tion with increased application of labor to any given area 
cannot go on indefinitely. A point is reached at which 
the further application of labor in the given area, though 
it may for a time result in a greater aggregate production, 
yields a less proportionate production, and finally a point 
is reached where the further application of labor ceases 
even to increase the aggregate result. 

It is misapprehended appreciation of this law in so far 
as it applies to agricultural production, which has led to 
the formulation and maintenance in economic teaching of 
what is called " the law of diminishing productiveness in 
agriculture." But the law is not peculiar to agriculture 
nor to the second mode of production which I have called 
" growing." It is true that this mode of production con- 



Chap.VII. RELATION OF SPACE IN PEODUCTION. 359 

sists in the utilization in aid of labor of the power of 
reproduction which characterizes life, and that living 
things in theii* growth and expansion require more space 
than things destitute of life. The plants that we grow 
require space below the surface of the ground in which to 
expand their roots and drink in certain constituents, and 
space above the surface in which to expand their leaves 
and drink in air and light. And the animals that we breed 
require space for their necessary movements. But though 
the spacial requirements of living things may be relatively 
greater than those of things not living, they are no less 
absolute in the one case than in the other. That two 
material things cannot exist in the same space is no more 
true of brutes than of beets, nor of beets than of bricks. 

In every form or sub-division of its three modes the 
exertion of human labor in the production of wealth 
requires space ; not merely standing or resting space, but 
moving space— space for the movements of the human 
body and its organs, space for the storage and changing 
in place of materials and tools and products. This is as 
true of the tailor, the carpenter, the machinist, the mer- 
chant or the clerk, as of the farmer or stock-grower, or of 
the fisherman or miner. One occupation may require 
more elbow-room or tool-room or storage-room than 
another, but they all alike require space, and so must come 
to a point where any gain from concentrating labor in 
space ceases, and further concentration results in a pro- 
portionate lessening of product, and finally in an absolute 
decline. The same law, first of increasing and then of 
diminishing returns, from the concentration of labor in 
space, which the first exponents of the doctrine of dimin- 
ishing returns in agriculture say is peculiar to that occu- 
pation, and its latter exponents say obtains in agriculture, 
and in the extraction of limited natural agents, such as 
coal, shows itself in all modes of production, and must 



360 THE PRODUCTION OF WEALTH. Book III. 

continue to do so, even did we discover some means of 
producing wealth by solidifying atmospheric air or an all- 
pervading ether, which some modern scientists suppose. 
For this alleged " law of diminishing returns in agricul- 
ture " is nothing more nor less than the spacial law of 
material existence, the reversal or denial of which is abso- 
lutely unthinkable. 

To see this, let us take a form of production widely 
differing from that of agriculture— the production of brick. 
Brick is usually made from clay, but can be made from other 
inorganic substances, such as shale, coal-dust, marble-dust, 
slag, etc., and no part of its production involves any use of 
the principle of increase that characterizes life. Nor can 
any of the substances used in brickmaking be considered 
as limited natural substances or agents by any classification 
that would not destroy the distinction by including the 
whole earth itseK as a limited natural agent. The produc- 
tion of brick is clearly one of the forms of production 
which those who uphold the doctrine of "diminishing 
returns in agriculture," or in its extension to the doctrine 
of "diminishing returns in the use of limited natural 
agents," would consider a form of production that can be 
continued indefinitely by the increased application of labor 
without diminishing returns. 

Yet we have only to think of it to see that what is called 
the law of diminishing returns in agriculture applies to 
the making of brick as fully as to the growing of beets. 
A single man engaged in making a thousand bricks would 
greatly waste labor if he were to diffuse his exertions over 
a square mile or a square acre, digging and burning the 
clay for one brick here, and for another some distance 
apart. His exertion would yield a much larger return 
if more closely concentrated in space. But there is a 
point in this concentration in space where the increase 
of exertion will begin to diminish its proportionate yield. 



Chap. VII. RELATION OF SPACE IN PRODUCTION. 361 

In the same superficial area required for tlie production of 
one brick, two bricks may be produced to advantage. But 
this concentration of labor in space cannot be continued 
indefinitely without diminishing the return and finally 
bringing production to a stop. To get the clay for a 
thousand bricks without use of more surface of the earth 
than is required to get the clay for one brick, would involve, 
even if it were possible at all, an enormous loss in the 
productiveness of the labor. And so if an attempt were 
made to put a thousand men to work in making brick on 
an area in which two men might work with advantage, 
the result would be not merely that the exertion of the 
thousand men could not produce five hundred times as 
much as the exertion of two men, but that it would produce 
nothing at all. Men so crowded would prevent each other 
from working. 

Or let us take that part of the production of bricks that 
of all parts requires least space — that which consists merely 
in the storage of bricks after they are made, so as to have 
them in readiness when required. 

Two bricks must occupy twice as much cubical space as 
one brick. But if placed one on top of the other, the two 
require for resting-place no more superficial area than the 
one ; while, as it requires on the part of a man of ordinary 
powers practically no more exertion to lay down or take 
up two bricks on the same surface than to lay down or 
take up one, there would be a greater gain in the produc- 
tiveness of labor so applied to the storage of brick than if 
applied to the storing of brick side by side on the surface 
of the ground. But this economy in the storage of brick 
could not be continued indefinitely. Though two bricks 
may be rested one on top of the other without any more 
use of superficial area than is required for the resting of 
one brick, this is not true of a thousand bricks, nor even 
of a hundred. Much less than a hundred bricks so placed 



362 THE PEODUCTION OF WEALTH. Booh III. 

as to rest upon tlie superficies required for tlie resting of 
one brick would become so unstable as to fall with tlie 
slightest jar or breeze. Before ten or even half a dozen 
bricks had been rested one on top of another it would 
become evident that any further extension of the perpen- 
dicular would require a further extension of base. And 
even with such extension of base as would permit of per- 
pendicular solidity, a point would finally be reached 
where, even if the surface continued solid, the weight of 
the upper bricks would crush the lower bricks to powder. 
Thus it is no more possible indefinitely to store bricks on 
a given area than on a given area indefinitely to grow 
beets. 

Up to a point, moreover, which is about waist-high for 
an ordinary man, it requires less exertion to place or take 
from place the last brick than the first brick, or in other 
words, labor at this point is more productive. But this 
point of greatest productiveness reached, the productive- 
ness of labor begins to decline with the further application 
of labor on the same area, until the point of no return or 
non-productiveness is reached. The reaching of this point 
of no return to the further application of labor in the 
storing of bricks on a given area may be delayed by the 
invention and use of such labor-saving devices as the 
wheelbarrow and steam-engine, but it cannot be prevented. 
There is a point in the application of labor to the storage 
of bricks on any given area, whether a square foot or a 
sqiiare mile, where the application of successive " doses of 
labor" (to use the phrase of the writers who have most 
elaborately dwelt on this assumed "law of diminishing 
productiveness in agriculture") must cease to yield pro- 
portionate returns, and finally where they must cease to 
yield any return. 

Thus the law of diminishing returns which has been 
held as peculiar to agriculture is as fully shown in the 



Chap.VII. EELATION OF SPACE IN PRODUCTION. 363 

mere storage of bricks as it is in the growing of crops or 
the breeding of animals. It is quite as true that all the 
bricks now needed in the three kingdoms could not be 
stored on a single square yard, as it is that all the food 
needed in the three kingdoms could not be grown on a 
single acre. The point of greatest efficiency or maximum 
productiveness in the application .of labor to land exists in 
all modes and all forms of production. It results in fact 
from nothing more nor less than the universal law or 
condition that all material existence, and consequently all 
production of wealth, requires space. 

Nor has the spacial requirement of production merely 
regard to the material object of production ; it has regard 
as well to the producer— to labor itself. Man himself is 
a material being requiring space for his existence even 
when in the most passive condition, and still more space for 
the movements necessary to the continuous maintenance 
of life and the exertion of his powers in the production of 
wealth. For an hour or two men may, as in listening to 
a speech or looking at a spectacle, remain crowded together 
in a space which gives them little more than standing-room. 
But to bring a few more into such a crowd would mean 
iUness, death, panic. Nor in such narrow space as men 
may for a while safely stand, could life be maintained for 
twenty-four hours, still less any mode of producing wealth 
be carried on. 

The division of labor permits the concentration of work- 
ers whose particular parts in production require compara- 
tively little space, and by building houses one story above 
another in our cities we economize superficial area in fur- 
nishing dwelling and working places in much the same way 
as by storing bricks one upon another. Improvements in 
the manufacture of steel and in the utilization of steam and 
electricity have much increased the height to which such 
structures can be carried, and we ali-eady have in our 



364 THE PRODUCTION OF WEALTH. JBooJc III. 

large American cities buildings of over twenty stories in 
which production of some sort is carried on. But though 
the requirement of superficial area may thus be pressed 
back a little by making use of cubical area (and in the 
tallest buildings of New York and Chicago rent is estimated 
in cubic not in square feet) this is only possible to a slight 
degree. The intensive use of land shown in the twenty- 
story building is in fact made possible by the extensive 
use of land brought about by improvements in transpor- 
tation, and every one of these monstrous buildings erected 
lessens the availability of adjoining land for similar 
purposes. 



CHAPTER VIII. 
THE RELATION OF TIME IN PRODUCTION. 

SHOWING THAT ALL MODES OF PRODUCTION HAVE 
RELATION TO TIME. 

Difference between apprehensions of space and time, the one objec- 
tive, the other subjective— Of spirits and of creation— All pro- 
duction requires time— The concentration of labor in time. 

AS space is the relation of things in extension, so time 
jA is tlie relation of things in sequence. 

But time, the relation of sequence, seems when we think 
of it, to be, so to speak, wider than space, the relation of 
extension. That is to say, space is a quality or affection 
of what we call matter ; and while we conceive of imma- 
terial things which having no extension have no relation 
in space, we cannot conceive of even immaterial things as 
having no relation in sequence. 

Our apprehension of space is through our senses, the 
direct impressions of which are uncertain and misleading, 
but which we habitually verify and correct and give some 
sort of exactness to, through other impressions of our 
senses. Our fii'st and simplest measure of space is in the 
impression of relative distance produced through the sight, 
or in the feeling of exertion required to move ourselves or 
some other object from point to point, as by paces or 
stone's throw or bow-shot; and tliese give way to more 

3C5 



366 THE PEODUCTION OF WEALTH. Boole III. 

exact measurements, such as by lines, inches, feet, miles, 
diameters of the earth or of the earth's orbit. Deprived 
of the senses, which make us cognizant of matter, it is 
impossible to see how we could have any impression or 
idea of space. 

Our impression of time, however, is not primarily 
through our senses. Though we correct and verify and 
give some exactness to it through them, there is a purely 
subjective apprehension of time in our own mental impres- 
sions or thoughts, which do not come all at once, but 
proceed or succeed one another, having to each other a 
relation of sequence. It is through this succession of 
mental impressions that we are in the first place and directly 
conscious of time. But while our direct consciousness of 
space must vary widely, our direct impressions of time are 
more variable still, since they depend upon the rapidity 
and intensity of mental impressions. We may seem to 
liave lived through years in the intense activity of a vivid 
dream, and to be utterly unconscious of the passage of 
time in a sound sleep. And while we can conceive the 
impression of space to be very different on the part of a 
sloth and that of a greyhound, it may be that the brief 
day of an animalcule maj^ seem as long to it as does a 
century of life to the larger elephant. 

But the reason of man enables him to obtain more exact 
measures of sequence from the uniformities of natural 
phenomena, such as days or years, moons or seasons, and 
from the regularity of mechanical movement as by sand- 
glasses or dials, or by clocks or watches. 

Time seems indeed to be necessary to and in some degree 
coincident with aE perceptions of space. But space does 
not seem necessary to time. That is to say, we seem to be 
able to imagine an immaterial being, or pure intelligence, 
not limited by or having necessary consciousness of 
relations of extension, and this is the way in which we 



Chap.rill. EELATION OF TIME IN PEODUCTION. 367 

Tisnally think of nnembodied spirits, such, as angels or 
devils; and of disembodied spirits, such as ghosts. But 
we cannot really think thus of them with regard to relations 
of sequence. We can indeed think of them as knowing 
nothing and regarding nothing of our measures of time— 
of a day being to them as a thousand years, or a thousand 
years as a day, for that these measures are only relative 
we can see for ourselves. But we can also see that in the 
realm of spirit there is and must be the same relation of 
preceding and succeeding, of coming before and coming 
after, as in the realm of matter ; and that this relastipn of 
sequence or time is really clearer and closer to that in us 
which we must think of as our immaterial part than is 
that of extension or space to our physical parts. 

We usually think of creation, the bringing into existence 
by a power superior to and anterior to that of man, as 
taking place at once as by the Divine fiat : '' God said, Let 
there be light : and there was light." But it would seem 
on analysis, that in this way of thinking we are considering 
rather the mental action which we conceive of as in itself 
immaterial— which our experience so far as it goes, and 
our reason so far as it can reach, teach us must lie back 
of all material expression— than of the material expres- 
sion itself. All speculations and theories of the origin 
of the cosmos, all religions which are their popular ex- 
pression, conceive of the appearance of material phenom- 
ena as in order or sequence, and consequently in time. 
Save in its childlike measurement of time by days, the 
ancient Hebrew account of the genesis of the material 
world recognizes this necessary order or sequence as 
fully as do modern scientists, for whose almost as vague 
measurements millenniums are too short. And so far as 
we can see, thought itself is in sequence and requires time, 
and its continued exertion biings about weariness. It, at 
any rate, seems to me that if we consider the essential and 



368 THE PEODUCTION OF WEALTH. Boole III. 

not merely the crude expression of the Hebrew scripture 
that in six days God created the heavens and the earth 
and rested on the seventh, it may embody a deep truth— 
the truth that exertion, mental as physical, requires a 
season of rest. 

But, all such speculations aside, it is certain that all 
production of wealth takes place in sequence and requires 
time. The tree must be felled before it can be hewn or 
sawed into lumber ; lumber must be seasoned before it can 
be used in building or wrought into the manifold articles 
made of wood. Ore must be taken from the vein before 
it can be smelted into iron, or from that form turned into 
steel or any of the manifold articles which by subsequent 
processes are made from iron or steel. Seeds must be 
planted before they can germinate; there must be a 
considerable interval of time before the young shoots can 
show themselves above the ground ; then a longer interval 
before they can grow and ripen and produce after their 
order ; grain must be harvested and ground before it can 
be converted into meal or flour or changed by labor from 
that form into other forms which gratify desire, all of 
which, like fermenting and baking, require time. So, in 
exchanging, time is required even for the concurrence 
and expression of human wills which result in the agree- 
ment to exchange, and still more time for the actual 
transference of things which completes the exchange. In 
short, time is a necessary element or condition in all 
exertion of labor in production. 

Now, from this necessary element or condition of all 
production, time, there result consequences similar to those 
which result from the necessary element or condition of 
aU production, space. That is to say, there is a lav/ 
governing and limiting the concentration of labor in time, 
as there is a law governing and limiting the concentration 
of labor in space. Thus there is in all forms of production 



Chap.niL KELATION OF TIME IN PEODUCTION. 369 

a point at which the concentration of labor in time gives 
the largest proportionate result ; after which the further 
concentration of labor in time tends to a diminution of 
proportionate result, and finally to prevent result. 

Thus there is a certain degree of concentration of labor 
in time (intensity of exertion), by which the individual can 
in any productive occupation accomphsh on the whole the 
largest result. But if a man work harder than this, 
endeavoring to concentrate more exertion in a shorter 
time, it will be to the relative and finally to the absolute 
loss of productiveness— a principle which gives its point 
to the fable of the hare and the tortoise. 

And so, if I go to a builder and say to him, '- In what 
time and at what price will you build me such and such a 
house ? " he would, after thinking, name a time, and a price 
based on it. This specification of time would be essential, 
and would involve a certain concentration of labor in time 
as the point of largest return or least cost. This I would 
soon find if, not quarreling with the price, I ask him largely 
to lessen the time. If I be a man like Beckford— the author 
of "Vathek," for whom Fonthill was built by relays of 
workmen, who lighted up the night with huge fires— a 
man to whom cost is nothing and time everything, I might 
get the builder somewhat to reduce the time in which he 
would agree, under bond, to build the house ; but only by 
greatly increasing the price, until finally a point would 
be reached where he would not consent to build the house 
in less time no matter at what price. He would say: 
"Although I get bricks already made, and boards already 
planed, and stairs and doors, and sashes and blinds, and 
whatever else may be obtained from the mill, and no 
matter how many men I put on and how much I disregard 
economy, the building of a house requires time. Cellar 
cannot be dug and foundations raised, and walls built and 
floors laid, and roof put on, and partitioning and plastering, 



370 THE PRODUCTION OF WEALTH. Book III. 

and plumbing, and painting and papering be done all at 
once, but only one after another, and at the cost of time 
as well as labor. The thing is impossible." 

And so, although the concentration of labor in agricul- 
ture may with decreasing efficiency hasten beyond the 
normal point the maturity of vegetables or fruit or even 
of animals, yet the point of absolute non-productiveness 
of further applications of labor is soon reached, and no 
amount of human exertion applied in any way we have yet 
discovered could bring wheat from the seed to the ear, or 
the chick from the e,g^ to the laying hen, in a week. 

The importance in political economy of this principle 
that all production of wealth requires time as well as labor 
we shall see later on; but the principle that time is a 
necessary element in all production we must take into 
account from the very first. 



CHAPTER IX. 
COOPERATION-ITS TWO WAYS. 

SHOWING THE TWO WAYS OP COOPERATION. 

Cooxieration is the imion of individual powers in the attainment of 
common ends— Its ways and theii* analogues : (1) the combination 
of effort ; (2) the separation of effort— Illustrations : of building 
houses, of joint-stock companies, etc.— Of sailing a boat— The 
principle shown in naval architecture— The Erie Canal— The bak- 
ing of bread— Production requires conscious thought— The same 
principle in mental effort— What is on the one side separation is 
on the other concentration— Extent of concentration and speciali- 
zation of work in modern civilization— The principle of the ma- 
chine—Beginning and increase of division of labor— Adam 
Smith's three heads— A better analysis. 

COOPERATION means joint action; the union of 
efforts to a common end. In recent economic writings 
the word has been so much used in a narrower sense that 
its meaning in political economy is given in the latest 
American dictionary (the Standard) as "a union of 
laborers or small capitalists for the purpose of advanta- 
geously manufacturing, buying and selling goods, and 
of pursuing other modes of mutual benefit ; also, loosely, 
profit-sharing." 

This is a degradation of a word that ought not to be 
acquiesced in, either in the interests of the English language 
or in the interests of political economy, and at the risk of 
being misunderstood by those who have become accus- 

371 



372 THE PRODUCTION OF WEALTH. Booh III. 

tomed to associate it with trivial schemes of profit-sharing 
or namby-pamby " reconciliations " of capital and labor, I 
shall use it as an economic term in its fuU meaning- 
understanding by cooperation that union of individual 
powers in the attainment of common ends which, as already 
said (Book I., Chapter V.), is the means whereby the 
enormous increase of man's power that characterizes 
civilization is secured. 

AU increase in the productive power of man over that 
with which nature endows the individual comes from the 
cooperation of individuals. But there are two ways in 
which this cooperation may take place. 

1. By the combination of effort. In this way, indi- 
viduals may accomplish what exceeds the .full power of the 
individual. 

2. By the separation of effort. In this way, the indi- 
vidual may accomplish for more than one what does not 
require the full power of the individual. 

This first way of cooperation may be styled the com- 
bination of labor, though perhajos the most distinctive term 
that could be used for it would be, the multiplication of 
labor, since the second way is well known by the term 
Adam Smith adopted for it, ''the division of labor." 

The one, the combination of labor, is analogous to the 
application in mechanics of that principle of the lever by 
which larger masses are moved in shorter distance or 
longer time, as in the crowbar. The other, the division of 
labor, is analogous to the application of that principle of 
the lever by which smaller masses are moved in longer 
distance or shorter time, as in the oar. 

To illustrate : The first way of cooperation, the com- 
bination of labor, enables a number of men to remove a 
rock or to raise a log that would be too heavy for them 
separately. In this way men conjoin themselves, as it 
were, into one stronger man. 



Chap. IX. COOPERATION-ITS TWO WAYS. 373 

Or to take an example so common in the early days of 
American settlement that " log-rolling " has become a term 
for legislative combination : Tom, Dick, Harry and Jim 
are building near each otlier their rude houses in the 
clearings. Each hews his own trees, but the logs are too 
heavy for one. man to get into iDlace. So the four unite 
their efforts, fii'st rolling one man's logs into place and 
then another's, until the logs of all four having been placed, 
the result is the same as if each had been enabled to 
concentrate into one time the force he could exert in four 
diiferent times. Examples of the same principle in a 
more elaborate state of society are to be found in the 
formation of joint-stock companies— the union of many 
small capitals to accomplish works such as the building of 
railroads, the construction of steamships, the erection of 
factories, etc., which requu'e greater capitals than are 
possessed by one man. 

But while great advantages result from the ability of 
individuals, by the combination of labor, to concentrate 
themselves as it were into one larger man, there are other 
times and other things in which an individual could 
accomplish more if he could divide himself, as it were, 
into a number of smaller men. 

Thus in sailing a boat, one man of extraordinary strength 
would be equal to two men of half his strength only in 
such exertions as rowing, hoisting the heavier sails, or the 
like. In other things, two men of ordinary strength would 
be able to do far more than the one man of double strength, 
since where he would have to stop one thing to do another, 
they could do both things at once. Thus while he would 
have to anchor in order to rest, they could move on without 
stopping, one sailing the boat while the other slept. There 
was a King Alphonso of Castile, celebrated by Emerson, 
who wished that men could be concentrated nine into one. 
But the loss of available power that would thus result 



374 THE PRODUCTION OF WEALTH. BooJc III. 

would soon be seen. How often now wlien beset by calls 
or duties wliich. require, not so mucli strength as time, 
does the thought occur, " I wish I could divide myself into 
half a dozen." What the division of labor does, is to permit 
men, as it were, so to divide themselves, thus enormously 
increasing their total effectiveness. 

To illustrate from the example used before : While at 
times Tom, Dick, Harry and Jim might each wish to move 
lo-gs, at other times they might each need to get something 
from a village distant two days' journey. To satisfy this 
need individually would thus require two days' effort on 
the part of each. But if Tom alone goes, performing the 
errands for all, and the others each do haK a day's work 
for him, the result is that all get at the expense of half a 
day's effort on the part of each what otherwise would have 
required two days' effort. 

It is in this manner that the second way of cooperation, 
the separation of effort, or to continue the term adopted by 
Adam Smith and sanctioned by long usage, the division of 
labor, saves labor ; that is to say, permits the accomplish- 
ment of equal results with less exertion, or of larger results 
with equal exertion. But out of this primary saving of 
exertion arise other savings of exertion. 

Let me illustrate from a domain outside of political 
economy the general principle from which these gains 
proceed. Nothing, perhaps, better shows the flexibility of 
the human mind than naval architecture. Yet, from the 
rude canoe to the monster ironclad, in all the endless 
variety of form that men have given to vessels intended 
to be propelled through the water, one principle always 
obtains. We always make such vessels longer than they 
are broad. Wliy is it that we do so ? It is that a vessel 
moving through the water has two main points of resistance 
to overcome— (1) the displacement of the water at her bow, 
the resistance to which is shown by the ripple or wave that 



CJiaj). IX. COOPEEATION-ITS TWO WAYS. 375 

arises there, and (2) tlie replacement of the water at her 
stern, the resistance to which is shown by the suction or 
wake or '' dead water" that she drags after her. In addition 
she must also overcome skin friction, shown, if one looks 
over the side of a vessel moving in smooth water, by the 
thin line of "dead water" or small ripples at her sides. 
But this, area for area, is slight as compared with the 
force required for displacement and replacement. 

When the Erie Canal was first built its locks were 
constructed to accommodate boats of a certain length. 
The enlargement of these locks so as to admit boats of 
double that length is now going on, but is not yet entirely 
completed, so that to pass through the entire canal, boats 
of the shorter length must still be used. Each of these 
boats is usually pulled by two horses or mules. But 
whoever passes over the railroads that parallel this great 
waterway will notice that for much of the distance the 
boats are now run in pairs, the bow of one boat being 
fastened to the stern of its predecessor, and that instead 
of four horses for the two boats only three are used. 
What makes this economy possible is that the displacement 
for the two boats is mainly borne by the first boat, and 
the replacement for the two is mainly borne by the second 
boat. As the additional force required to move two boats 
instead of one is thus not much more than the additional 
skin friction, three animals suffice instead of four. If the 
boats were so constructed as to fit closely together the 
economy would be still greater. 

Now, what we do in building a vessel is virtually to 
place one cross-section behind another cross-section so 
that the whole may be moved with no more resistance of 
displacement and replacement than would be required to 
move any one cross-section. The principle is the same as 
that which would prompt us if we had to carry two bodies 
through a wall, to carry the second through the hole that 



376 THE PEODUCTION OF WEALTH. BooJc III. 

it would be nee-essary to make for the first, instead of 
making another hole. In addition to this the increase of 
length without increase of width which results virtually 
from the placing of the cross-sections behind each other, 
permits the graduation or sharpening of entrance and 
egress, thus allowing displacement and replacement to be 
effected in longer times or more gradually, and with les- 
sened resistance ; although the fact that resisting surface 
does not increase proportionately to increase in cubical 
capacity, enables the large vessel to outstrip the small 
vessel with the same proportionate expenditure of power, 
even if built on the same lines. 

Now these principles, or rather this principle, for at 
bottom they are one, have their analogues in our making 
of things. Just as ten thousand tons can be transported 
in one vessel at much greater speed or with much less 
expenditure of power than in ten thousand vessels of one 
ton each, so can production be facilitated and economized 
by doing together things of like kind that are to be done. 

Take for instance the baking of bread. To bake a loaf 
of bread requires the application of a certain amount of 
heat for a certain time to a certain amount of dough. To 
heat an oven to this point requires a certain expenditure 
of fuel; to maintain it for this time a certain other 
expenditure of fuel ; and a certain expenditure of fuel is 
lost in the cooling of the oven after the bread is baked. 
To bake one loaf of bread in an ordinary oven thus 
requires a much greater relative expenditure of fuel than 
is requii'ed to bake at one time as many loaves as the oven 
will hold ; and a larger oven will bake more loaves with a 
proportionately less expenditure of fuel than a smaller 
one, since the loss of heat that escapes from the work of 
baking is relatively less; and if one batch of bread is 
succeeded by another batch without suffering the oven to 
cool, another great relative saving is made. So that the 



Chap. IX. COOPERATION-ITS TWO WAYS. 377 

concentration of the work of baking bread effects a great 
saving of labor in the item of fuel alone. And it is so 
with other items. 

The saving thus made by the concentration of work 
arises not only from physical laws but from mental laws 
as well. All our doing or accompUshing of things, except 
those that may be referred to instinct, requii'e in the first 
place the exertion of conscious thought. We see this in 
the child as it learns to walk, to talk, to read and write. 
We see this as adults when we begin to do things new to 
us, as to speak a foreign tongue, to write shorthand, or 
use a typewi'iter or a bicycle. But as we do the same 
things again and again, the mental exertion becomes less 
and less, until we come to do them automatically and 
without consciously thinking of how we do them. 

Now the result of what regarded from the standpoint 
of the whole or industrial organism is the separation of 
effort or division of labor in the production of wealth, 
is that the individual does fewer things but does them 
oftener. It is thus from the standpoint of the individual 
the concentration of effort or of labor, and so from the 
standpoint of the things to be done it involves a similar 
concentration in place and time, thus securing the saving 
of effort or increased efficiency of exertion which, to recur 
to oui' illustration, comes from doing one thing behind 
another and on a large instead of on a small scale. 

Thus, when instead of each individual or each family 
endeavoring to hunt, fish, obtain vegetables, build habita- 
tions and make clothing or tools, for the satisfaction of 
theu' own needs, some devote themselves to doing one 
thing and some to doing another of the things required 
for the satisfaction of the general needs, what is the 
separation of function from the standpoint of the all or 
industrial whole is the concentration of function in its 
units, and special trades and vocations are developed. 



378 THE PRODUCTION OF WEALTH. BooJc III. 

And as the social organism grows by increase in numbers 
or tbe widening of the circle of exchanges, or both, this 
differentiation of function between its units tends con- 
stantly to increase, augmenting the efficiency of the 
productive powers of man to a degree to which we can 
assign no limits, and of which the marvelous increase in 
productive power which so strikingly characterizes our 
modern civilization affords but a faint forecast. 

In civilized society where the division of labor has been 
carried to great lengths, we are so used to it that it is hard 
to realize how much we owe to it, and how utterly different 
our life would be without it. But as one tries to think to 
what we should be reduced without division of labor, he 
will see how large is the part it plays in the production of 
wealth— so large, indeed, that without it man as we know 
him could not exist. Take for instance the providing of 
clothing. If each one had to make his own clothing from 
the raw material, he could get nothing better than leaves 
or skins. Even with aU the advantages which the division 
of labor gives in the making of cloth, of needles, thread, 
buttons, etc., let any one unused to it set himself to the 
making of a garment. He will soon realize how hard it 
is to make the fii'st one ; how much easier and better the 
second is made than the first, the third than the second, 
and so on, until the process ceases to requii-e thought and 
becomes automatic. When by means of the division of 
labor, the making of clothing is so far concentrated that 
the clothing for some dozens or scores of men can be made 
together, then individuals can devote themselves solely to 
the making of clothes, with greatly increased economy. 
As the concentration of clothes-making proceeds further, 
and the making of clothes for hundi-eds, thousands, tens 
of thousands, and even hundreds of thousands of indi- 
viduals is by the development of the readj^-made clothing 
industry brought together, greater and greater economies 



Cluqy.IX. COOPERATION-ITS TWO WAYS. 379 

become possible. Separate individuals devote themselves 
to the making of particular garments, and then to the 
making of particular parts or to particular processes. 
Instead of one tailor cutting out a garment with a pair 
of shears and then proceeding to make it in all its parts, 
cutters who do nothing else cut out scores of garments at 
once with great knives ; the operations of basting, Kning, 
buttonholing, etc., are performed by different people who 
devote themselves to doing these things alone, and whose 
work is aided by powerful machines, the use of which 
becomes possible with the larger scale and greater 
continuity of employment this concentration permits. 

It is this concentration and specialization of work, with 
the division of labor, that brings about the development of 
labor-saving machinery of all kinds. The essential quality 
of the machine is its adaptation for the doing of certain 
special things. The human body considered as a machine 
is of aU machines that which is best adapted for the doing 
of the greatest variety of things. But for doing only one 
thing, for the increase of quantity at the expense of variety, 
man is able to make machines which within a narrow 
range are far superior to the tools nature gives him. And 
the same principle governs the employment of forces other 
than the force he can command in his muscles. The 
utilization of winds and tides and currents and falling 
streams, of steam and of electricity, and chemical attrac- 
tions and repulsions, is dependent on this concentration. 

Thus the di%dsion of labor inv^olves and proceeds from 
the concentration of effort for the satisfaction of desires. 
It begins when there are two individuals who cooperate ; 
it increases and becomes productive of greater and greater 
economies with the increase of the number who thus 
cooperate. 

Adam Smith, who begins his "Wealth of Nations" by 
considering how cooperation increases the productive 



380 THE PRODUCTION OP WEALTH. Booklll. 

powers of mankind, which he styles ''the division of 
labor," refers to the economy which it produces under 
three heads : 

1. The increased dexterity of workmen. 

2. The saving of time by the greater continuity of 
employment. 

3. The economy effected by the use of machinery. 
But on a larger and fuller survey we may perhaps best 

analyze the advantages that result from the cooperation 
of labor as follows : 

A. The combination of labor permits a number of 
individuals by direct union of their powers to accomplish 
what severally would be impossible. 

B. The division of labor, with the concentration and 
cooperation it involves, permits the doing for many (or a 
larger number) of what may with a less expenditure be 
done by one (or by a smaller number) : 

1. By the saving of time and effort, as in the preceding 
illustration, where one man goes on a journey which to 
accomplish severally four men would have to make. 

2. By utilizing the differing powers of individuals, as 
where those who excel in physical strength devote them- 
selves to things requiring physical strength, while those 
who are inferior in physical strength do the things which 
require less physical strength, but for which they are 
otherwise just as capable, thus producing the same net 
results as would a bringing up of all to the highest level 
of physical strength ; or where those who excel in other 
qualities do the things for which such qualities are best 
adapted, thus practically bringing up the level of the 
accomplishment of all to that of the highest qualities of 
each. 

3. By increasing skill, consequent upon those who do a 
larger amount of that same kind of work being able to 
acquire facility in it. 



Chap.IX. COOPERATION-ITS TWO WAYS. 381 

4. By accumulating knowledge. The same tendency 
which increases the incommunicable knowledge called 
skill, also tends to increase the communicable knowledge 
properly so called, which consists in a knowing of the 
relations of things to other external things, and which 
constitutes a possession of the economic body or Greater 
Leviathan, transferable by writing or similar means. 

5. By utilizing the advantages of doing things on a 
large scale instead of on a small scale, and of doing them 
successively instead of separately. 

6. By utilizing the natural forces, and by the invention 
and use of machines and of improved processes, for the 
use of wliich the large scale of production gives advan- 
tages. 



CHAPTER X. 
COOPERATION-ITS TWO KINDS. 

SHOWING THE TWO KINDS OF COOPERATION, AND HOW THE 
POWER OF THE ONE GREATLY EXCEEDS THAT OF THE 
OTHER. 

The kind of cooperation which, as to method of union or how of 
initiation, results from without and may be called directed or con- 
scious cooperation — Another proceeding from within which may 
be called spontaneous or unconscious cooperation — Types of the 
two kinds and their analogues— Tacking of a full-rigged ship and 
of a bird — Intelligence that suf&ces for the one impossible for the 
other— The savage and the ship— Unconscious cooperation re- 
quired in ship-building— Conscious cooperation will not sulfice for 
the work of unconscious— The fatal defect of socialism— The 
reason of this is that the power of thought is spiritual and cannot 
be fused as can physical force— Of "man power" and "mind 
power"— Illustration from the optician— Impossibility of social- 
ism—Society a Leviathan greater than that of Hobbes. 

WE have seen that there are two ways or modes in 
which cooperation increases productive power. If 
we ask how cooperation is itself brought about, we see 
that there is in this also a distinction, and that cooperation 
is of two essentially different kinds. The Hue of distinc- 
tion as to what I have called the ways of cooperation, and 
have in the last chapter considered, is as to the method of 
action or how of accomplishment ; the line of distinction 
as to what I shall call the kinds of cooperation, and am 

382 



Chap. X. COOPERATION-ITS TWO KINDS. 383 

about in this chapter to consider, is as to the method of 
union or how of initiative. 

^ There is one kind of cooperation, proceeding as it were 
from without, which results from the conscious direction 
of a controlling will to a definite end. This we may call 
directed or conscious cooperation. There is another kind 
of cooperation, proceeding- as it were from within, which 
results from a correlation in the actions of independent 
wills, each seeking but its own immediate purpose, and 
careless, if not indeed ignorant, of the general result. This 
we may call spontaneous or unconscious cooperation. 

The movement of a great army is a good type of 
cooperation of one kind. - Here the actions of many 
individuals are subordinated to and directed by one 
conscious will, they becoming, as it were, its body and 
executing its thought. The providing of a great city 
with all the manifold things which are constantly needed 
by its inhabitants is a good type of cooperation of the 
other kind. This kind of cooperation is far wider, far 
finer, far more strongly and delicately organized, than the 
kind of cooperation involved in the movements of an 
army, yet it is brought about not by subordination to the 
direction of one conscious will, which knows the general 
result at which it aims ; but by the correlation of actions 
originating in many independent wills, each aiming at its 
own small purpose without care for or thought of the 
general result. 

The one kind of cooperation seems to have its analogue 
in those related movements of our body which we are able 
consciously to direct. The other kind of cooperation 
seems to have its analogue in the correlation of the 
innumerable movements, of which we are unconscious, 
that maintain the bodily frame— motions which in their 
complexity, delicacy and precision far transcend our 
powers of conscious direction, yet by whose perfect 



384 THE PRODUCTION OF WEALTH. Booh III. 

adjustment to each other and to the purpose of the whole 
that cooperation of part and function that makes up the 
human body and keeps it in life and vigor is brought 
about and supported, 

A beautiful instance of cooperation of the first kind is 
furnished by the tacking of a square-rigged ship under 
full sail. The noble vessel, bending gracefully to the 
breeze, under her cloud of canvas, comes driving along, 
cleaving white furrows at her bow and leaving a yeasty 
wake at her stern. Suddenly her jibs fly free and her 
spanker flattens, as she curves towards the wind; her 
foreyards round in and their sails begin to shake, and at 
length, as what were their weather braces are hauled 
taut, to fill on the other side. The after sails that at first 
held the wind as before, begin in their turn to spill; then 
their yards are shifted, and they too take the wind on a 
different side; and with every sheet and tack in its new 
place the vessel gathering again her deadened headway, 
begins to drive the foam from her bow as she-bends on the 
other side to cut her way in a new direction. So har- 
monious are her movements, so seemingly instinct with 
life, that the savage who sees for the first time such a 
vessel beating along the coast might take her for a great 
bird, changing its direction with the movement of its 
wings as do sea-gull and albatross. 

And between ship and bird there are certain resem- 
blances. Both are structures in which various parts are 
combined into a related whole and distinct motions are 
correlated in harmonious action. And in both movement 
is produced by the varying angles at which flat surfaces 
are by a mechanism of joints and ligaments exposed to 
the impact of air. In a bird, however, the parts in their 
motions obey instinctively and unconsciously the prompt- 
ings of the conscious will. But in the ship the motions of 
the parts are produced by the distinct action of a number 



Chai). X. COOPERATION-ITS TWO KINDS. 385 

of conscious wills, ranging from one or two dozen in a 
mercliant vessel to several hnndred in an old-fashioned 
skip of war. Tlieir cooperation is produced, not in- 
stinctively and unconsciously, but by intelligent obedience 
to the intelligent orders of one directing will, which 
prescribes to every man his place and function, directing 
when, how, and by whom, each motion shall be made. 
The bird veers, because when it wills to veer, nerve and 
tendon directly respond with the necessary motions. The 
ship tacks because the separate wills that manage her 
rudder and sails consciously obey the successive commands 
which prescribe each of the necessary motions from the 
first order, " FuU for stays ! " to the last, " Belay aU ! " A 
series of intelligent directions, consciously obeyed by those 
to whom they are addressed, bring about and correlate the 
movements of the parts. 

Nor could the manoeuvers of a ship be carried on without 
such intelligent direction. Any attempt to substitute 
independent action, no matter how willing, for responsive 
obedience to intelligent direction would be certain ere 
long to result as in the traditional coasting schooner, 
manned by two — captain and mate — where the captain 
who was steering, irritated by some gratuitous advice of 
the mate who was tending jib-sheets, yelled out to him, 
" You run your end of this schooner and I'll run mine ! " 
Whereupon there was a rattle of chain at the bow, and the 
mate yelled back, '' Captain, IVe anchored my end of this 
schooner ; you can run your end where you choose ! " ^ 
/^Now, much of the cooperation of man in producing 
social effects is of the nature of that by which a ship is 
sailed. It involves the delegation to individuals of the 
power of arranging and directing what others shall do, 
thus securing for the general action the advantages of 
one managing and cori'elatiug intelligence. But while 
cooperation of this kind is indispensable to producing 



386 THE PEODUCTION OF WEALTH. Booh III. 

certain results by conjoined action, it is helpless or all but 
helpless to bring about certain other results involving a 
longer series and more complicated and delicate actions 
and adjustments.^j 

To continue our illustration : The bird structurally is 
a machine as the ship is a machine, which the conscious 
will of the bird, controlling certain vohmtary movements, 
causes to rise or fall, to sweep in this direction or in that, 
to be carried with the gale or to tack in its teeth, in short 
to execute all the movements, sometimes swift and some- 
times slow, but nearly always graceful, of which this bird 
machine is capable. But the conscious will that controls 
the voluntary motions of the bird ; the intelligence that is 
the captain of this aerial craft, v/ill not account for the 
machine itself; for its consummate arrangements and 
adjustments and adaptions. These not merely infinitely 
transcend the intelligence of the bird, but of the highest 
human intelligence. Tlie union of lightness with strength, 
of rigidity with flexibility, of grace with power ; the appro- 
priateness of material, the connection and relation of parts, 
the economies of space and energy and function, the 
applications of what are to us the most complex and 
recondite of physical laws, make the bird as a machine, as 
far superior to the best and highest machines of man's 
construction, as the paintings of the great master are to 
the rude slate-drawings of the prattling child. 

The bird is not a construction as man's machines are 
constructions. It was not built, but grew. Its first 
tangible form, as far as we can trace it, was a Kmy envelop 
containing a substance called the yolk, swimming in a 
sticky fluid, the white. Under certain conditions and 
without external influence except that of gentle and 
continued heat, the molecules of the contained substance 
began, by some influence from within, and seemingly, of 
themselves, to range themselves into cells, and cells to 



ChaiJ. X. COOPERATION-ITS TWO KINDS. 387 

form into tissue and bone, and turning in related order 
into heart and lungs, backbone and head, stomach and 
bowels, brain and nerve, wings and feet, skin and feathers, 
until at length a tiny living thing pecked its way out, 
lea"sdng an empty shell, and with a little eating and sleeping, 
a little hardening of gristle and lengthening of feathers, 
the "it" of it, the new captain of the new air-ship, began 
to try rudder and sails and paddles, until having " learned 
the ropes," and got accustomed to the measurement of 
distance and the "feel" of motion, it started oif boldly to 
skim and to soar, to get food and digest it, to live its life 
and propagate its kind. 

The veriest savages must at times ponder over the 
mystery of the egg, as we civihzed men at times ponder 
over the mystery of common things — for to them as to us 
it would be an insoluble mystery. But it is the ship, 
not the bird, that would most excite their wonder and 
admiration, for the savage would see in the ship as soon 
as he came close to it, not a thing that grew, but a thing 
that was made— a higher expression of the same power 
which he himself exercises in his own rude constructions. 
He would see in it, when he came to look closely, but a 
vastly greater and better canoe, and would wonder and 
admire as he who has begun to paint stands in wonder and 
admiration before the picture of a master, which one who 
knew nothing of the difficulties of the art would pass with 
little notice. As the savage would understand the kind of 
cooperation called into play in the managing of a vessel, 
so would he attribute the building of the vessel to coopera- 
tion of the same kind. Since a larger canoe than one man 
can build may be built by the same man if he can unite 
the exertions of others in cutting, rolling, hewing and 
hollowing a great log, so would it seem to our savage that 
it was in this way that the ship of civilization was built. 
And the admiration which the ship would excite in him 



388 THE PEODUCTION OF WEALTH. BooTc III. 

would be an admiration of the men who sailed it, whom 
he would naturally take to be the men who built it, or at 
least to be men who could build it. The superiority of 
the ship to the rude canoes with which he was familiar he 
would attribute to superiority of their personal qualities 
—their greater knowledge and skill and power. They 
would indeed seem to him at first as very gods. 

Yet the savage would be wrong. The superiority of the 
ship does not indicate the superiority of individual men. 
If driven ashore with the loss of their ship and all its 
contents, these men would be more helpless than so many 
of his own people, and would find it more difficult to make 
even a canoe. Even if they had saved tools and stores, it 
would be only after long toil that they could succeed in 
building some rude, small craft unfitted for a long voyage 
and rough weather, and not in any respect comparable with 
their ship. For a modern ship is rather a growth than a 
direct construction in that as between the kind of coopera- 
tion required for its production and that which suffices for 
that of a canoe, there is a difterence which suggests some- 
thing not altogether unlike the difference between a work 
of nature and a work of man. 

The cooperation required in the making of a large 
canoe or in the sailing of a ship is exceedingly simple 
as compared to that involved in the construction and 
equipment of a well-found, first-class ship. The actual 
putting together, according to the plans of the naval 
architect, of the separate parts and materials which com- 
pose such a ship, would require, after they had been 
assembled, some directed cooperation. But if cooperation 
of this kind could suffice for even putting the parts 
together after they had been made and assembled, how 
could it suffice for making those various parts from the. 
forms in which nature offers their material, and assembling 
them in the place where they were to be put together ? 



Cha]}. X. COOPEEATION-ITS TWO KINDS. 389 

Consider the timbers, the planks, the spars 5 the iron and 
steel of various kinds and forms ; the copper, the brass, 
the bolts, screws, spikes, chains; the ropes, of steel and 
hemp and cotton; the canvas of various textui-es; the 
blocks and winches and windlasses ; the pumps, the boats, 
the sextants, the chronometers, the spy-glasses and patent 
logs, the barometers and thermometers, charts, nautical 
almanacs, rockets and colored lights ; food, clothing, tools, 
medicines and furniture, and all the various things, which 
it would be tiresome fully to specify, that go to the con- 
struction and furnishing of a first-class sailing-ship of 
modern type, to say nothing of the still greater complexity 
of the first-class steamer. Directed cooperation never did, 
and I do not think in the nature of things it ever could, 
make and assemble such a variety of products, involving 
as many of them do the use of costly machinery and 
consummate skill, and the existence of subsidiary products 
and processes. 

When a ship-builder receives an order for such a ship 
as this he does not send men into the forest, some to cut 
oak, others to cut yellow pine, others to cut white pine, 
others to cut hickory and others still to cut ash and lig- 
num-vitee : he does not direct some to mine iron ore, and 
others copper ore, and others lead ore, and others still to 
dig the coal with wliich these ores are to be smelted, and 
the fire-clay for the smelting- vessels ; some to plant hemp, 
and some to plant cotton, and others to breed silkworms ; 
some to make glass, others to kill beasts for their hides 
and tallow, some to get pitch and rosin, oil, paint, paper, 
felt and mercury. Nor does he attempt to direct the 
manifold operations by which these raw materials are to 
be brought into the required forms and combinations, and 
assembled in the place where the ship is to be built. Such 
a task would transcend the wisdom and power of a Solomon. 
What he does is to avail himself of the resources of a high 



390 THE PRODUCTION OF WEALTH. Book III. 

civilizatioi], for without that he would be helpless, and to 
make use for his pui'pose of the unconscious cooperation 
by which without his direction, or any general dii-ection, 
the efforts of many men, working in many different places 
and in occupations which cover almost the whole field of 
a minutely diversified industry, each animated solely by 
the effort to obtain the satisfaction of his personal desii'es 
in what to him is the easiest way, have brought together 
the materials and productions needed for the putting 
together of such a ship. 

He buys of various dealers in such things, knees, beams, 
planking, spars, sails, cables, ropes, boats, lanterns, flags, 
nautical instruments, pumps, stoves; and he probably 
contracts for various parts of the work of putting together 
the hull, such as calking, sheathing, painting, etc. ; of 
making the sails and rigging the spars. And each of 
these separate branches of collation and production will 
be found on inquiry to reach out and ramify into other 
branches having necessary relations with still other 
branches. So far from any lifetime sufficing to acquire, 
or any single brain being able to hold, the varied know- 
ledge that goes to the building and equipping of a mod- 
ern sailing-ship, already becoming antiquated by the still 
more complex steamer, I doubt if the best-informed man 
on such subjects, even though he took a twelvemonth to 
study up, could give even the names of the various sepa- 
rate divisions of labor involved. 

A modern ship, like a modern railway, is a product 
of modern civilization ; of that correlation of individual 
efforts in which what we call civilization essentially con- 
sists; of that unconscious cooperation which does not 
come by personal direction, as it were from without, but 
grows, as it were from within, by the relation of the 
efforts of individuals, each seeking the satisfaction of 
individual desires. A mere master of men, though he 



Cluq). X. COOPERATION-ITS TWO KINDS. 391 

might command the services of miUions, could not make 
such a ship unless in a civilization prepared for it. A 
Pharaoh that built pyramids, a Genghis Khan who raised 
mounds of skulls, an Alexander, a Caesar, or even a 
Henry VIII. could not do it. 

The kind of cooperation which I have illustrated by 
the tacking of a ship is a very simple matter. It could be 
readily taught, the difficulties of language aside, to Malays, 
or Somalis, or Hindus, or Chinamen, or to the men who 
manned the Roman galleys or the viking ships. But that 
kind of cooperation which is involved in the making of 
such a ship is a much deeper and more complex matter. 
It is beyond the power of conscious direction to order or 
bring about. It can no more be advanced or improved 
by any exertion of the power of directing the conscious 
actions of men than the conscious will of the individual 
can add a cubit to his stature. The only thing that 
conscious direction can do to aid it is to let it alone ; to 
give it freedom to grow, leaving men free to seek the 
gratification of their own desii'es in the ways that to them 
seem best. To attempt to apply that kind of cooperation 
which requires dii'ection from without to the work proper 
for that kind of cooperation which requires direction from 
within, is like asking the carpenter who can build a 
cliicken-house to build a chicken also. 
CThis is the fatal defect of all forms of socialism— the 
reason of the fact, which all observation shows, that any 
attempt to carry conscious regulation and direction beyond 
the narrow sphere of social life in which it is necessary, 
inevitably works injury, hindering even what it is intended 
to help. 

And the rationale of this great fact may, I think, at least 
in some measm-e, be perceived when we consider that the 
originating element in all production is thought or intel- 
ligence, the spiritual not the material. This spiritual 



392 THE PRODUCTION OF WEALTH. Book III. 

element, this intelligence or thought power as it appears 
in man, cannot be combined or fused as can material force. "7 

Two men may pull or push twice as much as one man, 
and the physical force of one hundred thousand men 
properly brought to bear wUl one hundred thousand times 
exceed the physical force of a single man. But intelligence 
cannot be thus aggregated. Two men cannot see twice as 
far as one man, nor a hundred thousand determine one 
hundred thousand times as well. If it be true that " In a 
multitude of counselors there is wisdom," it is only in the 
sense that in a large comparison of views and opinions 
eccentricities and aberrations are likely to be eliminated. 
But in this elimination the quahties necessary for superior 
judgment and prompt direction are also lost. No one ever 
said, " In a multitude of generals there is victory." On 
the contrary the adage is, " One poor general is better than 
two good ones." 

In the first kind of cooperation, as for example, when 
ten men pull on the same rope in the same way in obedience 
to the direction of one man, there is a utilization of the 
physical force of ten at the direction of the mental force 
of one. But there is at the same time a loss or rather 
non-utilization of the mental force of ten. The result can 
be no greater than if the ten men who are pulling were for 
the time utterly devoid of intelligence — mere automata. 
And we can readily conceive of such extensions in the 
applications of machinery to the utilization of natural 
physical forces that the captain of a ship might by touching 
an electrical keyboard, so give responsive motion to rudder, 
sheets and braces, as to tack ship without a crew, which 
would be a long approach in the mechanism of a ship to 
the mechanism of a bird. 

But in the kind of cooperation that I have called 
spontaneous, where the direction comes from within, what 
is utilized in production is not merely the sum of the 



Chap. X. COOPERATION-ITS TWO KINDS. 393 

physical power of the units, but the sum of their intelli- 
gence. If I may be permitted to use for a moment the 
term "man power" and symbol M as expressing the 
physical force which one individual can exert, and the 
term " mind power " and symbol M' as suggesting quanti- 
tatively the individual power of intelligence or thought, 
the best possible result of the exertion of one hundred 
thousand men in cooperation of the first kind would be 
100,000 man power x 1 mind power or 100,000 MM' ; 
while of the same number of men employed in the second 
kind of cooperation it would be 100,000 man power x 
100,000 mind power or 10,000,000,000 MM'. 

The illustration is clumsy, but it may serve to suggest 
the enormous difference which we see developed in the 
two kinds of cooperation, and which as it seems to me 
arises at least in important part from the fact that while 
in the second kind of cooperation the sum of intelligence 
utilized is that of the whole of the cooperating units, in 
the first kind of cooperation it is only that of a very sma,ll 
part. 

In other words it is only in independent action that the 
full powers of the man may be utilized. The subordination 
of one human will to another human will, while it may in 
certain ways secure unity of action, must always where 
intelligence is needed, involve loss of productive power. 
This we see exemplified in slavery and where governments 
have undertaken (as is the tendency of all government) 
unduly to limit the freedom of the individual. But where 
unity of effort, or rather combination of effort, can be 
secured while leaving full freedom to the individual, the 
whole of productive power may still be utilized and the 
result be immeasurably greater. 

The hardening of muscular tissue, which comes to us as 
the years of our lives go by, has deprived the delicate 
mechanism which once adequately moved the lenses of my 



394 THE PRODUCTION OF WEALTH. Booh III. 

eyes of what opticians call their power of accommodation, 
so that to my natural sight printed pages that I once read 
comfortably are now indistinguishably confused. By 
piercing a small pinhole in a piece of cardboard and 
holding it close to one of my eyes, while I shut the other, 
I can cut off from my vision so many of the rays of light 
that the few which reach my retina do not interfere with 
each other, and I can thus see the same printed page for 
a few moments distinctly. But this is by the sacrifice of 
otherwise available rays of light. Now by means of a 
properly ground pair of spectacles which deflect so as to 
utilize for the eyes the interfering rays of light I can use 
them all. 

To attempt in social affairs to secure by cooperation of 
the first kind that alignment of effort which by natural 
law belongs to cooperation of the second kind, is like 
attempting to secure by cardboard and pinholes the 
definiteness of vision that can be far better secured by 
spectacles. Such is the attempt of what is properly called 
socialism. 

Imagine an aggregation of men in which it was attempted 
to secure by the external direction involved in socialistic 
theories that division of labor which grows up natnrally 
in society where men are left free. For the intelligent 
direction thus required an individual man or individual 
men must be selected, for even if there be angels and 
archangels in the world that is invisible to us, they are 
not at our command. 

Taking no note of the difficulties which universal ex- 
perience shows always to attend iliQ choice of the de- 
positaries of power, and ignoring the inevitable tendency 
to tyranny and oppression, of command over the actions 
of others, simply consider, even if the very wisest and best 
of men were selected for such purposes, the task that would 
be put upon them in the ordering of the when, where, how 



CMp. X. COOPEEATION-ITS TWO KINDS. 395 

and by whom that would be involved in the intelligent 
direction and supervision of the almost infinitely complex 
and constantly changing- relations and adjustments in- 
volved in such division of labor as goes on in a civilized 
community. The task transcends the power of human 
intelhgence at its very highest. It is evidently as much 
beyond the ability of conscious direction as the correlation 
of the processes that maintain the human body in health 
and vigor is beyond it. 

Aristotle, Julius Ceesar, Shakespeare, Newton, may be 
fairly taken as examples of high-water mark in the powers 
of the human mind. Could any of them, had the control 
of the processes that maintain the individual organism 
been relegated to his conscious intelligence, have kept life 
in his body a single minute? Newton, so the tradition 
runs, stopped his tobacco-bowl with his lady's finger. 
What would have become of Newton's heart if the ordering 
of its beats had been devolved on Newton's mind ? 

This mind of ours, this conscious intelhgence that 
perceives, compares, judges and wills, wondrous and far- 
reaching as are its powers, is like the eye that may look 
to far-off suns and milky ways, but cannot see its own 
mechanism. This body of ours in which our mind is 
cased, tliis infinitely complex and delicate machine through 
which that which feels and thinks becomes conscious of 
the external world, and its will is transmuted into motion, 
exists only by virtue of unconscious intelligence which 
works while conscious intelhgence rests ; which is on guard 
while it sleeps ; which wills without its concurrence and 
plans without its contriving, of which it has almost no 
direct knowledge and over which it has almost no dii*ect 
control. 

And so it is the spontaneous, unconscious cooperation 
of individuals which, going on in the industrial body, 
the Greater Leviathan than that of Hobbes, conjoins 



396 THE PEODUCTION OF WEALTH. Book III. 

individual efforts in the production of wealth, to the 
enormous increase in productive power, and distributes 
the product among the units of which it is composed. It 
is the nature and laws of such cooperation that it is the 
primary province of political economy to ascertain. 



CHAPTER XI. 
THE OFFICE OF EXCHANGE IN PRODUCTION. 

SHOWING THAT IN MAN THE. LACK OF INSTINCT IS SUPPLIED 
BY THE HIGHER QUALITY OF REASON, WHICH LEADS TO 
EXCHANGE. 

The cooperation of ants and bees is from within and not from with- 
out ; from instinct and not from direction— Man has little instinct ; 
hut the want supplied by reason— Eeason shows itself in exchange 
—This suffices for the unconscious cooperation of the economic body 
or Greater Leviathan— Of the three modes of production, "ex- 
changing " is the highest— Mistake of writers on political economy 
—The motive of exchange. 

IT is a curious fact, having in it suggestions that it 
would lead beyond our purpose to follow, that the living 
things that come nearest to the social organization of man 
are not those to whom we are structurally most allied, but 
those belonging to a widely separated genus, that of insects. 
The cooperation by which ants and bees build houses and 
construct pubhc works, procure and store food, make 
provision for future needs, rear their young, meet the 
assaults of enemies and confront general dangers, gives 
to their social life a striking superficial likeness to that of 
human societies, and brings them in this apparently far 
closer to us than are animals to whom we are structurally 
more akin. 

397 



398 THE PEODUCTION OF WEALTH. BooTcIII. 

The cooperation by which the social life of such insects 
is carried on seems at fii-st glance to be of the kind I have 
called directed cooperation, in which correlation in the 
efforts of individual units is brought about, as it were 
from without, by such subordination of some of the units 
to other units as secures conscious obedience in response 
to intelligent direction. The republican monarchy of the 
bees has its queen, its drones, its workers ; the ants range 
themselves for march, for battle, or for work, in militant 
or industrial armies. 

Yet closer observation shows that this is more in seeming 
than in fact, and that the great agency in the correlation 
of effort which the insects show is something wliich 
impresses the units not from without but from within 
their own nature, the force or power or impulse that we 
call instinct, which operating directly on the individual 
unit, brings each, as it were, of its own volition, to its 
proper place and function with relation to the whole, in 
something of the same way in which the vital or germinative 
force operates within the egg-shell to bring the separate 
cells into relations that result in the living bird. 

Now of this power or impulse that we call instinct 
conscious man has little. While the involuntary and 
unconscious functions of his bodily frame may be ordered 
and maintained by it or something akin to it, and while 
it may in the same way furnish the sub -stratum of what 
we may call his mental frame, yet instinct, so strong in 
the orders of life below him, seems with man to fade and 
withdraw as the higher power of reason assumes control. 
What of instinct he retains would not suf&ce even for such 
social constructions as those of ants or bees or beavers. 
But reason, which in him has superseded instinct, brings 
a new and seemingly illimitable power of uniting and 
correlating individual efforts, by enabling and disposing 
him to exchange with his feUows. The act of exchange is 



Chap. XI. OFFICE OF EXCHANGE IN PKODUCTION. 399 

that of deliberately parting with one thing for the purpose 
and as a means of getting another thing. It is an act 
that involves foresight, calculation, judgment— qualities 
in which reason differs from instinct. 

All living things that we know of cooperate in some 
kind and to some degree. So far as we can see, nothing 
that lives can live in and for itself alone. But man is the 
only one who cooperates by exchanging, and he may be 
distinguished from all the numberless tribes that with him 
tenant the earth as the exchanging animal. Of them all 
he is the only one who seeks to obtain one thing by giving 
another. A dog may prefer a big bone to a little bone, 
and where it cannot hold on to both, may keep one in 
preference to the other. But no dog or other animal will 
deliberately and voluntarily give up one desirable thing 
for another desirable thing. When between two desired 
things the question " Which ? " is put to it, its answer is 
always the answer of the child, " Both," until it is forced 
to leave the one in order to hold the other. No other 
animal uses bait to attract its prey ; no other animal plants 
edible seeds that it may gather the produce. No other 
animal gives another what it itself would like to have in 
order to receive in return what it likes better. But such 
acts come naturally to man with his maturity, and are of 
his distinguishing principle. 

Exchange is the great agency by which what I have 
called the spontaneous or unconscious cooperation of men 
in the production of wealth is brought about, and economic 
units are welded into that social organism which is the 
Greater Leviathan. To this economic body, this Greater 
Leviathan, into which it builds the economic units, it is 
what the nerves or perhaps the ganglions are to the 
individual body. Or, to make use of another illustration, 
it is to our material desires aud powers of satisfying them 
what the switchboard of a telegraph or telephone or other 



400 THE PEODUCTION OF WEALTH. Book III. 

electric system is to that system, a means by wMch exer- 
tion of one kind in one place may be transmuted into sat- 
isfaction of another kind in another place, and thus the 
efforts of individual units be conjoined and correlated so 
as to yield satisfactions in most useful place and form, and 
to an amount enormously exceeding what otherwise would 
be possible. 

Of the three modes of production which I have distin- 
guished as adapting, growing and exchanging, the last is 
that by which alone the higher applications of the modes 
of adapting and growing are made available. Were it not 
for exchange the cooperation of individuals in the produc- 
tion of wealth could go no further than it might be carried 
by the natural instincts that operate in the formation of 
the family, or by that kind of cooperation in which indi- 
vidual wills are made subordinate to another individual 
will. These it is evident would not suffice for the lowest 
stage of civilization. For not only does slavery itself, 
which requires that the slaves shall be fed and clothed, 
involve some sort of exchange, though a very inadequate 
one, but the labor of slaves must be supplemented by 
exchange to permit the slave-owner to enjoy any more 
than the rudest satisfactions. It was only by exchanging 
the produce of their labor that the American slave-owner 
could provide himself with more than his slaves themselves 
could obtain from his own plantation, and a slave-based 
society in which there was no exchanging could hardly 
carry the arts further than the construction of the rudest 
huts and tools. When we speak of pyramids and canals 
being constructed by enforced labor we are forgetting the 
great amount of exchanging which was involved in such 
work. 

Many if not most of the writers on political economy 
have treated exchange as a part of distribution. On the 
contrarj^, it properly belongs to production. It is by 



Chap. XI. OFFICE OF EXCHANGE IN PEODUCTION. 401 

exchange and through exchange that man obtains and is 
able to exert the power of cooperation which with the 
advance of civilization so enormously increases his ability 
to produce wealth. 

The motive of exchange is the primary postulate of 
political economy, the universal fact that men seek to 
gratify their desires with the least exertion. This leads 
men by a universal impulse to seek to gratify their desires 
by exchange wherever they can thus obtain the gratification 
of desire with less exertion than in any other way; and 
by virtue of the natural laws, both physical and mental, 
explained in Chapter II. of this Book, this is from the very 
origin of human society, and increasingly Avith its advance, 
the easiest way of procuring the satisfaction of the greatest 
number of desires. 

And in addition to the laws already explained there is 
another law or condition of nature related to man which 
is taken advantage of to the enormous increase of pro- 
ductive power in exchange.^ 

1 A note, "Leave six pages, " written in pencil, appears on the last page of this 
chapter in the MS. The indications are that it was intended not for this, but for 
the next succeeding chapter, which was left unfinished. — H. G., Jr. 



CHAPTER XII. 
OFFICE OF COMPETITION IN PRODUCTION. 

SHOWING THAT COMPETITION BRINGS TRADE, AND CONSE- 
QUENTLY SERVICE, TO ITS JUST LEVEL. 

["Competition is the life of trade" an old and true adage— The as- 
sumption that it is an evil springs from two causes— one bad, the 
other good— The bad cause at the root of protectionism— Law of 
competition a natural law— Competition necessary to civilization. ]i 

THAT '' competition is the life of trade," is an old and 
true adage. But in current thought and current 
literature there is so much assumption that competition is 
an evil that it is worth while to examine at some length 
its cause and office in the production of wealth. 

Much of this assumption that competition is an evil and 
a wrong that should be restricted and indeed abolished in 
the higher interests of society springs from the desire of 
men unduly to profit at the expense of their fellows by 
distorting natural laws of the distribution of wealth. This 
is true of the form of socialism which was known in the 
time of Adam Smith as the mercantile system or theory, 
and which still exists with but little diminished strength 
under the general name of protectionism. Much of it 
again has a nobler origin, coming from a righteous in- 

1 No summary of this chapter appears in the MS. The summary here presented 
and inclosed by brackets is supplied for the reader's convenience. — H. G., Jr. 

402 



Cha2h XIL OFFICE OF COMPETITION IN PRODUCTION. 403 

dignation with tlie monstrous inequalities in tlie existing 
distribution of wealth throughout the civilized world, 
coupled with a mistaken assumption that these inequalities 
are due to competition, 

I do not propose here to treat either of protectionism or 
socialism proper, my purpose being not that of controversy 
or refutation, but merely that of discovering and explaining 
the natui'al laws with which the science of political economy 
is concerned. But the law of competition is one of these 
natural laws, without an understanding of which we 
cannot fully understand the economy or system by which 
that Intelligence to which we must refer the origin and 
existence of the world has provided that the advance of 
mankind in civilization should be an advance towards the 
general enjoyment of literally boundless wealth. 

The competition of men with their fellows in the pro- 
duction of wealth has its origin in the impulse to satisfy 
desires with the least expenditure of exertion. 

Competition is indeed the life of trade, in a deeper sense 
than that it is a mere facilitator of trade. It is the life of 
trade in the sense that its spirit or impulse is the spirit or 
impulse of trade or exchange. 



CHAPTER XIII. 
OF DEMAND AND SUPPLY IN PRODUCTION.i 



• No more than the title of this chapter was -written. The reader will find the 
subject of demand and supply in production treated in "Progress and Poverty" 
and in " Social Problems." — H. G., Jr. 

404 



CHAPTER XIV. 

ORDER OF THE THREE FACTORS OF PRODUC- 
TION. 

SHOWING THE AGREEMENT OP ALL ECONOMISTS AS TO THE 
NAMES AND ORDER OF THE FACTORS OF PRODUCTION. 

Land and labor necessary elements in production— Union of a com- 
posite element, capital— Reason for dwelling on this agreement as 
to order. 

ALL economists give the factors of production as 
J\. three— land, labor and capital. And without ex- 
ception that I know of, they name them in this order. 
This, indeed, is the natural order; the order of their 
appearance. The world, so far as political economy takes 
cognizance of it, began with land. Reason tells us that 
land, with all its powers and potentialities, including even 
aU. vegetable and animal life, existed before man was, and 
must have existed before he could be. But whether still 
"formless and void," or already instinct with the lower 
forms of life, so long as there was in the world only the 
economic element land, production in the economic sense 
could not be, and there was no wealth. Wlien man 
appeared, and the economic element labor was united to 
the economic element land, production began, and its 
product, wealth, resulted. At length (for in the myths 
and poems in which mankind have expressed all the 
wisest could tell of our far beginnings they have always 

405 



406 THE PRODUCTION OF WEALTH. BooJcIIL 

loved to picture a golden age devoid of care), or more 
probably almost immediately (for the very first of onr 
race must have possessed that reason which is the 
distinguishing quality of man), the greater power that 
could be gained by using wealth in aid of labor was seen, 
and a third factor of production, capital, appeared. 

But between this third factor and the two factors which 
precede it, a difference in nature and importance is to be 
noted. Land and labor are original and necessary factors. 
They cannot be resolved into each other, and they are 
indispensable to production, being necessary to production 
in all its modes. But capital is not an original factor. 
It is a compound or derivative factor, resulting from the 
union of the two original factors, land and labor, and 
being resolvable on final analysis into a form of the active 
factor, labor. It is not indispensable to production, 
being necessary, as before explained, not in all modes of 
production, but only in some modes. Nevertheless, ^the 
part that it bears in production is so separable, and the 
convenience that is served by distinguishing it from 
the original factors is so great, that it has been properly 
recognized by the earliest and by all subsequent writers 
in political economy as a separate factor ; and the three 
elements by whose union wealth is produced in the civilized 
state are given by the names and in the order of (1) land, 
(2) labor, and (3) capital. 

It may seem to the reader superfluous that I should lay 
such stress upon the order of the three factors of production, 
for it is not more self-evident that the mother must precede 
the chUd than that land must precede labor, and that labor 
must precede capital. But I dwell upon this question of 
order because it is the key to confusions which have 
brought the teaching of the science of political economy 
to absurdity and stultification. Such of these writers as 
have condescended to make any definitions of the terms 



Chap. XIV. THEEE FACTORS OF PRODUCTION. 407 

they use have indeed in these definitions recognized the 
natural order of the three factors of production. But 
whoever will follow them will see that without seeming 
conscious of it themselves they soon slip into a reversal of 
this order, and, literally making the last first, proceed to 
assume that capital is the prime factor in production. So- 
cialism, which gives such undue prominence to capital and 
yet is so completely at sea as to the real nature and func- 
tions of capital has the root of its absurdities in the teach- 
ings of the scholastic economists. 

But the results of this confusion as to the nature and 
order of the factors of production will be more fully treated 
when we come to consider the distribution of wealth. All 
that it is necessary to do here is to point out the true order 
of the factors of production and to make clear what they 
are. Let us proceed to consider them one by one. 



CHAPTER XV. 
THE FIRST FACTOR OF PRODUCTION-LAND. 

SHOWING THAT LAND IS THE NATURAL OR PASSIVE FACTOR 
IN ALL PRODUCTION. 

The term "land"— "Landowners"— Labor the only active factor. 

MAN produces by drawing from nature. Land, in 
political economy, is the term for that from which 
he draws — for that which must exist before he himself can 
exist. In other words, the term land in political economy 
means the natural or passive element in production, and 
includes the whole external world accessible to man, with 
aU its powers, qualities and products, except perhaps those 
portions of it which are for the time included in man's 
body or in his products, and which therefore temporarily 
belong to the categories, man and wealth, passing again 
in their re-absorption by nature into the category, land. 

The original and ordinary meaning of the word, land, 
is that of dry superficies of the earth as distinguished from 
water or air. But man, as distinguished from the denizens 
of the water or the air, is primarily a land animal. The 
dry surface of the earth is his habitat, from which alone 
he can venture upon or make use of any other element, or 
obtain access to any other material thing or potency. 
Thus, as a law term, land means not merely the dry 
superficies of the earth, but all that is above and all that 

408 



Ch(q). XV. FIEST FACTOR OF PRODUCTION-LAND. 409 

may be below it, from zenitii to uadir. For the same 
reason the word land receives like extension of meaniuff 
when used as a term of political economy, and comprises 
all having material form that man has received or can 
receive from nature, that is to say, from God. 

Thus the term '4and" in political economy means the 
natural or passive factor, on which and by or through 
which labor produces, and can alone produce. 

But that land is only a passive factor in production 
must be carefully kept in mind. It is a thing, but not a 
person, and though the tendency to personification leads 
not merely in poetry but in common speech to the use of 
phrases which attribute sentiment and action to land, it is 
important to remember that when we speak of a smiling, 
a sullen, or an angry landscape, of a generous or a niggard 
land, of the earth giving or the earth receiving, or rewarding 
or denying, or of nature tempting or forbidding, aiding or 
preventing, we are merely using figures of speech more 
forcibly or more gracefully to express our own feelings by 
reflection from inanimate objects. In the production of 
wealth land cannot act ; it can only be acted upon. Man 
alone is the actor. 

Nor is this principle changed or avoided when we use 
the word land as expressive of the people who own land. 
Landowners, as landowners, are as purely passive in 
production as land itself ; they take no part in production 
whatever. When Arthur Young spoke of the "magic of 
property turning sands to gold" he was using a figure 
of speech. What he meant to say was that the effect of 
security in the enjoyment of the produce of labor on land 
was to induce men to exert that labor with more assiduity 
and intelligence, and thus to increase the produce. Land 
cannot know whether men regard it as property or not, 
nor does that fact in any degree affect its powers. Sand 
is sand and gold is gold, and tlie rain falls and the sun 



410 THE PRODUCTION OF WEALTH, BooJc III. 

shines, as little affected by the moral considerations that 
men recognize as the telegraph-wire is affected by the 
meaning of the messages that pass through it, or as the 
rock is affected by the twitter of the birds that fly over it, 

I speak of this because although their definition of land 
as a factor in production is precisely that which I have 
given, there is to be found in the accepted treatises on 
political economy a constant tendency to the assumption 
that landowners, through their ownership of land, con- 
tribute to production. 

That the persons whom we call landowners may con- 
tribute their labor or their capital to production is of 
course true, but that they should contribute to production 
as landowners, and by virtue of that ownership, is as 
ridiculously impossible as that the belief of a lunatic in 
his ownership of the moon should be the cause of her 
brilliancy. 

We could not if we would, and should not if we could, 
utterly eschew metaphors; but in political economy we 
must be always careful to hold them at their true meaning. 



CHAPTER XVI. 
THE SECOND FACTOR OF PRODUCTION— LABOR. 

SHOWING THAT LABOR IS THE HUMAN OR ACTIVE FACTOR 
IN ALL PRODUCTION. 

The term labor— It is the only active factor in producing wealth, 
and by natui'e spiritual. 

j^LL human actions, or at least all conscious human 
actions, have their source in desire and their end or 
aim in the satisfaction of desire. The intermediary action 
by which desire secures its aim in satisfaction, is exertion. 
The economic term for this exertion is labor. It is the 
active, and from the human standpoint, the primary or 
initiative, factor in all production— that which being 
applied to land brings about all the changes conducive to 
the satisfaction of desii'c that it is possible for man to 
make in the material world. 

In political economy there is no other term for this 
exertion than labor. That is to say, the term labor 
includes all human exertion in the production of wealth, 
whatever its mode. In common parlance we often speak 
of brain labor and hand labor as though they were entirely 
distinct kinds of exertion, and labor is often spoken of as 
though it involved only muscular exertion. But in reality 
any form of labor, that is to say, any form of human 
exertion in the production of wealth above that which 

411 



412 THE PEODUCTION OF WEALTH. Book III. 

cattle may be applied to doing, requires the linman brain 
as truly as the human hand, and would be impossible 
without the exercise of mental faculties on the part of the 
laborer. 

Labor in fact is only physical in external form. In its 
origin it is mental or on strict analysis spiritual. It is 
indeed the point at which, or the means by which, the 
spiritual element which is in man, the Ego, or essential, 
begins to exert its control on matter and motion, and to 
modify the material world to its desires. 

As land is the natural or passive factor in all production, 
so labor is the human or active factor. As such, it is the 
initiatory factor. All production results from the action 
of labor on land, and hence it is truly said that labor is 
the producer of all wealth. 



CHAPTER XVII. 
THE THIRD FACTOR OF PRODUCTION— CAPITAL. 

SHOWING THAT CAPITAL IS NOT A PRIMARY FACTOR, BUT 
PROCEEDS PROM LAND AND LABOR, AND IS A FORM OR 
USE OP WEALTH. 

Capital is essentially labor raised to a higher power— Where it may, 
and where it must aid labor— In itself it is helpless. 

\KE primary factors of production are labor and land, 
and from their union all production comes. Their 
concrete product is wealth, which is land modified by labor 
so as to fit it or better fit it for the satisfaction of human 
desires. What is usually distinguished as the third factor 
of production, capital, is, as we have seen, a form or use 
of wealth. 

Capital, which is not in itself a distinguishable element, 
but which it must always be kept in mind consists of wealth 
applied to the aid of labor in further production, is not a 
primary factor. There can be production without it, and 
there must have been production without it, or it could 
not in the first place have appeared. It is a secondary 
and compound factor, coming after and resulting from the 
union of labor and land in the production of wealth. It 
is in essence labor raised by a second union witli land to 
a third or higher power. But it is to civilized life so 
necessary and important as to be rightfully accorded in 

413 



414 THE PEODUCTION OF WEALTH. Book III. 

political economy the place of a third factor in production. 
Without the use of capital man could raise himself but 
little above the level of the animals. 

I have already, in Chapter II. of this Book, generalized 
the various modes of production into three, adapting, 
growing and exchanging. Now in the first of these modes, 
which I have called adapting, the changing of natural 
products either in form or in place so as to fit them for 
the satisfaction of human desires, capital may aid labor, 
and in the higher forms of this mode must aid labor. 
But it is not absolutely necessary, to the lower forms at 
least. Some of the smaller and less powerful animals 
might be taken and the natural fruits and vegetables 
obtained, some rude shelter and clothing produced, and 
even some rude forms of wealth adapted from the mineral 
world, without the application of capital. 

But in the second and third of these modes, those namely 
of growing and exchanging, capital must aid labor, or is 
indispensable. For there can be no cultivation of plants 
or breeding of animals, unless vegeta^bles or animals 
previously brought into the category of wealth are devoted 
not to the consumption that gives direct satisfaction to 
desire, but to the production of more wealth ; and there 
can be no exchanging of wealth until some wealth is 
applied by its owners, not to consumption, but to exchange 
for other wealth or for services. 

It is to be observed that capital of itself can do nothing. 
It is always a subsidiary, never an initiatory factor. The 
initiatory factor is always labor. That is to say, in the 
production of wealth labor always uses capital, is never 
used by capital. This is not merely literally true, when 
by the term capital we mean the thing capital. It is also 
true when we personify the term and mean by it not the 
thing capital, but the men who are possessed of capital. 
The capitalist pure and simple, the man who merely controls 



Chap. XVII. THE THIRD FACTOR-CAPITAL. 41B 

capital, has in his hands the power of assisting labor to 
produce. But purely as capitalist he cannot exercise that 
power. It can be exercised only by labor. To utilize it 
he must himself exercise at least some of the functions of 
labor, or he must put his capital, on some terms, at the use 
of those who do. 

I speak of this because it is the habit, not only of 
common speech but of many writers on political economy, 
to speak as though capital were the initiatory factor in 
production, and as if capital or capitalists employed labor ; 
whereas in fact, no matter what the form of the arrange- 
ment for the use of capital, it is always labor that starts 
production and is aided by capital; never capital that 
starts production and is aided by labor. 

It cannot be too clearly kept in mind that labor is the 
only producer either of wealth or of capital. Appropriation 
can produce nothing. Its sole power is that of affecting 
distribution under penalty of preventing production. This 
may put wealth or capital in the hands of the appropriator, 
by taking it from others; but can never bring it into 
existence. 



BOOK lY. 



THE DISTRIBUTION OF WEALTH 



For " Mars is a tyrant," as Timotheus ex- 
presses it ; but justice, according to Pindar, 
"is the rightful sovereign of the world." 
The things which Homer tells us kings 
receive from Jove are not machines for 
taking towns or ships with brazen beaks, 
but law and justice ; these they are to 
guard and cultivate. And it is not the 
most warlike, the most violent and san- 
guinary, but the justest of princes, whom 
he calls the disciple of Jupiter.— P?Mtorc7i, 
Demetrius. 



CONTENTS OF BOOK IV. 



THE DISTRIBUTION OF WEALTH. 

PAGE 

INTEODUCTION TO BOOK IV 421 

CHAPTER I. 
THE MEANING OF DISTRIBUTION. 

SHOWING THE MEANING AND USES OP THE WOBD DISTRIBUTION ; 
THE PLACE AND MEANING OP THE ECONOMIC TERM ; AND THAT 
IT IS CONCERNED ONLY WITH NATURAL LAWS. 

Derivation and uses of the word — Exchange, consumption and 
taxation not proper divisions of political economy — Need of a 
consideration of distribution — It is the continuation and end 
of what begins in production, and thus the final division of 
political economy — -The meaning usually assigned to distribu- 
tion as an economic term, and its true meaning . . . 423 

CHAPTER II. 
THE NATURE OF DISTRIBUTION. 

SHOWING THE FALLACY OP THE CONTENTION THAT DISTRIBUTION 
IS A MATTER OP HUMAN LAW; THAT THE NATURAL LAWS OF 
DISTRIBUTION ARE MANIFEST NOT ON WEALTH ALREADY PRO- 
DUCED, BUT ON SUBSEQUENT PRODUCTION ; AND THAT THEY ARE 
MORAL LAWS. 

John Stuart Mill's argument that distribution is a matter of hu- 
man law — Its evidence of the unscientific character of the 
scholastic economy — The fallacy it involves and the confusion 
it shows — Illustration from Bedouin and from civilized society 
— Natural laws of distribution do not act upon wealth already 
produced, but on future production — Reason of this — Illustra- 
tion of siphon and analogy of blood ..... 430 

419 



420 CONTENTS OF BOOK IV. 

CHAPTER III. 
THE COMMON PEECEPTION OF NATURAL LAW IN 
DISTRIBUTION. 

SHOWING THE COMMON AND INERADICABLE PERCEPTION OF 

NATURAL LAWS OF DISTRIBUTION. „.^„ 

PAGE 

Mill's admission of natural law in his argument that distribution 
is a matter of human law — Sequence and consequence — Human 
will and the will manifest in nature — Inflexibility of natural 
laws of distribution — Human will powerless to affect distribu- 
tion — This shown by attempts to affect distribution through 
restriction of production — Mill's confusion and his high char- 
acter 440 

CHAPTER IV. 
THE REAL DIFFERENCE BETWEEN LAWS OF 
PRODUCTION AND OF DISTRIBUTION. 

SHOWING THAT DISTRIBUTION HAS REFERENCE TO ETHICS, 
WHILE PRODUCTION HAS NOT. 

The laws of production are physical laws ; the laws of distribu- 
tion moral laws, concerned only with spirit — This the reason 
why the immutable character of the laws of distribution is more 
quickly and clearly recognized 450 

CHAPTER V. 
OF PROPERTY. 

SHOWING THAT PROPERTY DEPENDS UPON NATURAL LAW. 

The law of distribution must be the law which determines owner- 
ship — John Stuart Mill recognizes this ; but extending his error, 
treats property as a matter of human institution solely — His 
assertion quoted and examined — His utilitarianism — His 
further contradictions 454 

CHAPTER VI. 

CAUSE OF CONFUSION AS TO PROPERTY. 

SHOWING WHY AND HOW POLITICAL ECONOMISTS FELL INTO 
SUCH CONFUSIONS WITH REGARD TO PROPERTY. 

Mill blinded by the pre-assumption that land is property — He all 
but states later the true principle of property, but recovers by 
substituting in place of the economic term " land," the word in 
its colloquial use — The different senses of the word illustrated 
from the shore of New York harbor — Mill attempts to justify 
property in land, but succeeds only in justifying property in 
wealth 460 



INTEODUCTION TO BOOK IV. 

IN accordance with the earlier usage I have planned 
the division of political economy for purposes of in- 
vestigation into three grand divisions : I. — The nature of 
wealth. II.— The laws of production. III.— The laws of 
distribution. Having passed through the first two grand 
divisions, having seen the nature of wealth and the laws of 
its production, we proceed now to the laws of distribution. 
In the branch of political economy to which we now 
turn lies the heart of all economic controversies. For all 
disputes as to the nature of wealth and all disputes as to 
the production of wealth will be found at last to have their 
real ground in the distribution of wealth. Hence, tliis, as 
we shall find, is the part of political economy most beset 
with confusions. But if we move carefully, making sure 
as we go of the meaning of the words we use, we shall 
find no real difficulty. 



CHAPTER I. 
THE MEANING OF DISTRIBUTION. 

SHOWING THE ItlEANING AND USES OP THE WORD DISTRIBU- 
TION ; THE PLACE AND MEANING OP THE ECONOMIC TERM ; 
AND THAT IT IS CONCERNED ONLY AVITH NATURAL LAWS. 

Derivation and uses of the word— Exchange, consumption and taxation 
not proper divisions of political economy — Need of a consideration 
of distribution — It is the continuation and end of what begins in 
production, and thus the final division of political economy— The 
meaning usually assigned to distribution as an economic term, and 
its true meaning. 

THE word distribution comes from the Latin, dis, 
asunder, and tribuo, to give, or trihuere, to aUot. 

The common meaning of distribution differs from that 
of division by including with the idea of a separation into 
parts the idea of an apportionment or allotment of these 
parts, and is that of a division into or a division among. 

Thus the distribution of work, or duty, or function is 
the assignment to each cooperator of a separate part in 
securing an aggregate result ; the distribution of food, or 
alms, or of a trust fund, involves the allotment of a proper 
portion of the whole to each of the beneficiaries; the 
distribution of gas, or water, or heat, or electricity, through 
a building or city, means the causing of a flow to each 
part of its proper quota ; the distribution of rocks, plants 
or animals over the globe involves the idea of causes or 

423 



424 THE DISTRIBUTION OF WEALTH. Book IV. 

laws which have brought them to the places where they 
are found ; the distribution of weight or strain in a building 
or structure involves the idea of a division of the aggregate 
mass or pressure among the various parts ; distribution in 
logic is the application of a term to all members of a class 
taken separately, so that what is affirmed or denied of 
the whole is not merely affirmed or denied of them all 
collectively, but of each considered independently; the 
distribution of things into categories, or species, or genera, 
in the sciences is the cataloguing of them with reference 
to their likeness or unlikeness in certain respects of form, 
origin or quality. 

What is called the distribution of mail in a post-office is 
the reverse, or complement, of what is called the collection 
of mail. It consists of the separation into pouches or bags 
according to the common destination of the mail matter 
brought in for transmission, or of a similar separation of 
the mail matter received for delivery. 

What is called the distribution of type in a printing-office 
is the reverse, or the complement, of what is called the 
composition of type. In composition the printer places 
into a ^^ stick" the letters and spaces in the sequence 
that forms words. One line composed and "justified" by 
such changes in spacing as bring it to the exact " measure," 
he proceeds to compose another line. When his stick 
contains as many lines as it will conveniently hold he 
"empties" it on a "galley," from which this "matter" is 
finally " imposed " in a " form." As many impressions as 
are desired having been made from the " form " upon paper 
(or upon a " matrix " if any process of stereotyping is used), 
what until put to its destined use of printing was " live 
matter" becomes in the terminology of the printing-office 
"dead matter," and that the movable types may be used 
again in composition the printer proceeds to distribute 
them. If the matter has been thrown into "pi" by an 



Chap. I. THE MEANING OF DISTEIBUTION. 425 

accident which disarranges the order of the letters in 
words, "distribution" is a very tedious operation, since 
each letter has to be separately noted. But if not, the 
compositor, now become distributor, takes in his left hand 
so that he can read as much of the " dead matter" as he 
can conveniently hold, and beginning at the right end of 
the upper line lifts with the forefinger and thumb of his 
right hand a word or words, reading with a quick glance 
as he does so, and moving his hand over the case, releases 
each letter or space or " quad " (blank) over its appropriate 
box, from which they may be readily taken for renewed 
composition. 

This is the system of composing and distributing type 
in use from the time of Gutenberg to the present day. 
But printing-machines are now (1896) rapidly beginning 
to supersede hand- work. In these, composition takes place 
by touches on a keyboard, like that of a typewi-iter. In 
the type-using machines the touch on a key brings the 
letter into place, justification is made afterwards by hand, 
and distribution is accomplished by revolving the type 
around a cylinder where by nicks on its body it is carried 
to its appropriate receptacle. In the type-casting machines, 
each type is cast as the key is touched, and instead of being 
distributed is re-melted. In the line-making machines, or 
linotypes, the composition is of movable matrices, the line 
is automatically justified by wedges which increase or 
diminish the space between the words, and is cast on the 
face of a " slug " by a jet of molten metal. In these there 
is no distribution ; the slugs when no longer needed being 
thrown into the melting-pot. 

As has already been observed, the distribution of wealth 
in political economy does not include transportation and 
exchange, as most of the standard economic writers 
assume. Nor yet is there any logical reason for treating 
exchange as a separate department in political economy, as 



426 THE DISTEIBUTION OF WEALTH. BoohlV. 

is done by those writers who define political economy as 
the science which teaches of the laws which regulate the 
production, distribution and exchange of wealth, or as 
they sometimes phrase it, of the production, exchange and 
distribution of wealth. Transportation and exchange are 
properly included in production, being a part of the 
process in which natural objects are by the exertion of 
human labor better fitted to satisfy the desires of man. 

Nor yet again is there any logical reason in the division 
of the field of the science of political economy for following 
that department which treats of the distribution of wealth 
with other departments treating of the consumption of 
wealth or of taxation, as is done by some of the minor and 
more recent writers. Taxation is a matter of human law, 
while the proper subject of science is natural law. Nor 
does the science of political economy concern itself with 
consumption. It is finished and done— the purpose for 
which production began is concluded when it reaches 
distribution. 

The need of a consideration of the distribution of wealth 
in political economy comes from the cooperative character 
of the production of wealth in civilization. In the rudest 
state of humanity, where production is carried on by 
isolated human units, the product of each unit would in 
the act of production come into possession of that unit, 
and there would be no distribution of wealth and no need 
for considering it.* But in that higher state of humanity 
where separate units, each moved to action by the motive 
of satisfying its individual desires, cooperate to produc- 
tion, there necessarily arises when the product has been 
obtained, the question of its distribution. 

Distribution is in fact a continuation of production — the 
latter part of the same process of which production is the 

* Book I., Chapter I. 



Chai). I. THE MEANING OF DISTRIBUTION. 427 

first part. For the desire which prompts to exertion in 
production is the desire for satisfaction, and distribution 
is the process by which what is brought into being by 
production is carried to the point where it yields satisfaction 
to desire— which point is the end and aim of production. 

In a logical division of the field of political economy, 
that which relates to the distribution of wealth is the final 
part. For the beginning of all the actions and movements 
Vfhich political economy is called on to consider is in 
human desire. And their end and aim is the satisfaction of 
that desire. When this is reached political economy is 
finished, and this is reached with the distribution of wealth. 
With what becomes of wealth after it is distributed polit- 
ical economy has nothing whatever to do. It can take 
any further account of it only should it be reentered in 
the field of political economy as capital, and then only as 
an original and independent entry. What men choose to 
do with the wealth that is distributed to them may be of 
concern to them as individuals, or it may be of concern to 
the society of which they are a part, but it is of no concern 
to political economy. The branches of knowledge that 
consider the ultimate disposition of wealth may be 
instructive or useful . But they are not included in political 
economy, which does not embrace all knowledge or any 
knowledge, but has as a separate science a clear and well- 
defined field of its own. 

If, moved by a desire for potatoes, I dig, or plant, or 
weed, or gather them, or as a member of the great 
cooperative association, the body economic, in which 
civilization consists, I saw or plane, or fish or hunt, or 
play the fiddle, or preach sermons for the satisfaction of 
other people who in retm-n will give me potatoes or the 
means of getting potatoes, the whole transaction originat- 
ing in my desire for potatoes is finished when I get the 
potatoes, or rather when they are put at my disposal at 



428 THE DISTEIBUTION OF WEALTH. Book IV. 

tlie place contemplated in my desire. Whether I then 
choose to boil, bake, roast or fry them, to throw them at 
dogs or to feed them to hogs, to plant them as seed, or to 
let them decay ; to trade them off for other food or other 
satisfactions, or to transfer them to some one else as a 
free gift or under promise that by and by he will give me 
other potatoes or other satisfactions, is something outside 
of and beyond the series of transactions which originating 
in my desire for potatoes was ended and finished in my 
getting potatoes. 

As a term of political economy, distribution is usually 
said to mean the division of the results of production 
among the persons or classes of persons who have 
contributed to production. But this as we shall see is 
misleading, its real meaning being the division into 
categories corresponding to the categories or factors of 
production. 

In entering on this branch of our inquiry, it will be 
well to recall what, in Book I., I have dwelt upon at length, 
and what is here particularly needful to keep in mind, that 
the laws which it is the proper purpose of political economy 
to discover are not human laws, but natural laws. From 
this it follows that our inquiry into the laws of the 
distribution of wealth is not an inquiry into the municipal 
laws or human enactments which either here and now, or 
in any other time and place, prescribe or have prescribed 
how wealth shall be divided among men. With them we 
have no concern, unless it may be for purposes of illus- 
tration. What we have to seek are those laws of the 
distribution of wealth which belong to the natural order- 
laws which are a part of that system or arrangement which 
constitutes the social organism or body economic, as 
distinguished from the body politic or state, the Greater 
Leviathan that makes its appearance with civilization and 
develops with its advance. These natural laws are in all 



Chcii). I. THE MEANING OF DISTRIBUTION. 429 

tijTies and places the same, and though they may be crossed 
by human enactment, can never be annulled or swerved 
by it. 

It is more needful to call this to mind, because in what 
have passed for systematic treatises on political economy 
the fact that it is with natural laws, not human laws, that 
the science of political economy is concerned, has in treat- 
ing of the distribution of wealth been utterly ignored, 
and even flatly denied. 



CHAPTER II. 
THE NATURE OF DISTRIBUTION. 

SHOWING THE FALLACY OF THE CONTENTION THAT 
DISTRIBUTION IS A MATTER OF HUMAN LAW; THAT 
THE NATURAL LAWS OF DISTRIBUTION ARE MANIFEST 
NOT ON WEALTH ALREADY PRODUCED, BUT ON SUBSE- 
QUENT PRODUCTION; AND THAT THEY ARE MORAL LAWS. 

John Stuart Mill's argument that distribution is a matter of human 
law— Its evidence of the unscientific character of the scholastic 
economy— The fallacy it involves and the confusion it shows — 
Illustration from Bedouin and from civilized society— Natural laws 
of distribution do not act upon wealth already produced, but on 
future production— Eeason of this— Illustration of siphon and 
analogy of blood. 

MILL'S " Principles of Political Economy " is, I think, 
even at the present day entitled to the rank of the 
best and most systematic exposition of the scholasticaUy 
accepted political economy yet written, and as I wish to 
present in their very strongest form the opinions that I 
shall controvert, I qnote from it the argument from which 
it is assumed that the laws of distribution with which polit- 
ical economy has to deal are human laws. Mill opens 
with this argument the second grand division of his work, 
Book II., entitled '' Distribution," which follows his intro- 
ductory and the thirteen chapters devoted to "Produc- 
tion," and thus states the fundamental principle on which 
he endeavors to conduct his whole inquiry into distribu- 

430 



Chap. 11. THE NATURE OF DISTRIBUTION. 431 

tion, the principle that distribution is a matter of human 
institution solely : 

The principles which have been set forth in the first part of this 
treatise, are, in certain respects, strongly distinguished from those, 
on the consideration of -which we are now about to enter. The laws 
and conditions of the production of wealth, partake of the character 
of physical truths. There is nothing optional or arbitrary in them. 
Whatever mankind produce, must be produced in the modes, and 
under the conditions, imposed by the constitution of external things, 
and by the inherent properties of their own bodily and mental struc- 
ture. . . . 

But it is not so with the Distribution of Wealth. That is a matter 
of human institution solely. The things once there, mankind, indi- 
vidiially or collectively can do with them as they like. They can 
place them at the disposal of whomsoever they please, and on what- 
ever terms. Further, in the social state, in every state except total 
solitude, any disposal whatever of them can only take place by the 
consent of society, or rather of those who dispose of its active force. 
Even what a person has produced by his individual toil, unaided by 
any one, he cannot keep, unless by the permission of society. Not 
only can society take it from him, but individuals covild and would 
take it from him, if society only remained passive ; if it did not either 
interfere en masse, or employ and pay people for the piu'pose of pre- 
venting him from being disturbed in the possession. The distribution 
of wealth, therefore, depends on the laws and customs of society. 
The rules by which it is determined, are what the opinions and feel- 
ings of the ruling portion of the community make them, and are very 
different in different ages and countries ; and might be still more 
different, if mankind so chose. 

The opinions and feelings of mankind, doiibtless, are not a matter 
of chance. They are consequences of the fundamental laws of human 
nature, combined with the existing state of knowledge and experience, 
a,nd the existing condition of social institutions and intellectual and 
moral culture. But the laws of the generation of human opinions 
are not within our present subject. They are part of the general 
theory of human progress, a far larger and more difficult subject of 
inquiry than political economy. We have here to consider, not the 
causes, but the consequences, of the rules according to which wealth 
may be distributed. Those, at least, are as little ai'bitrary, and have 
as much the character of physical laws, as the laws of production. 
Human beings can control their own acts, but not the consequences 



432 THE DISTRIBUTION OF WEALTH. Book IV. 

of their acts either to themselves or to others. Society can subject 
the distribution of wealth to whatever rules it thinks best ; but what 
practical results will flow from the operation of those rules, must be 
discovered, like any other physical or mental truths, by observation 
and reasoning. 

We proceed, then, to the consideration of the different modes of 
distributing the produce of land and labor which have been adopted 
in practice or may be conceived in theory. * 

In all the dreary waste of economic treatises that I have 
plodded through, this, by a man I greatly esteem, is the 
best attempt that I know of to explain what is really meant 
in political economy by laws of distribution. And it is no 
small evidence of Mill's superiority to those who since the 
time of Adam Smith had preceded him, and to those who 
since his own time have followed him^ in treatises which 
bear the stamp of authority in our schools and colleges, 
that he should feel it incumbent on him even to attempt 
this explanation. But this attempt brings into clear relief 
the unscientific character of what had passed and yet stiU 
passes as expositions of the science of political economy. 
In it we are deliberately told that the laws which it is the 
object of political economy to discover, are, in the first 
part of its inquiries, natural laws, but that in the later and 
practically more important part of those inquiries, they 
are human laws ! Political economy of this sort is as 
incongruous as the image that troubled Nebuchadnezzar, 
with its head of fine gold and its feet part of iron and part 
of clay, for in the first part its subject-matter is natural 
law, and in the last and practically more important, it is 
human law. 

Let us examine this argument carefully, for it is made 
on behalf of the current political economy by a man who 
from his twelfth year had been carefully trained in 
systematic logic and who before he wrote this had won 

* Book II., Chapter I., Sec. 1, "Principles of Political Economy." 



Chap. 11. THE NATURE OP DISTRIBUTION. 433 

the highest reputation as a logician, by a great work on 
systematic logic, that is repeated and accepted to this day 
b}^ professors of political economy in universities and 
coUeges that make systematic logic a part of their curri- 
culum. 

To make this examination is to see that the plausibility 
of the argument comes from the leading proposition — '^ The 
things once there, mankind individually or collectively can 
do with them as they hke." It is evidently this that in 
the mind of Mill himself and in the minds of the professors 
and students who have since gone over his ^' Principles of 
Political Economy," has seemed to prove beyond perad- 
venture that though the laws of production may be natural 
laws, the laws of distribution are human laws. For in 
itself this proposition is a self-evident truth. Nothing, 
indeed, can be clearer than that "the things once there, 
mankind individually or collectively can do with them as 
they like "—that is to say, wealth once produced, human 
law may distribute it as human will may ordain. 

Yet while this proposition that things once there mankind 
can do with them as they like, is in itself irrefutable, the 
argument in which it is introduced is an egregious instance 
of the fallacy called by the logicians petitio prindpii, or 
begging the question. The question that Mill is arguing 
is whether what is called in political economy the distri- 
bution of wealth is a matter of natural law or a matter of 
human law, and what he does is to cite the fact that in 
what is called in human law the distribution of wealth, 
mankind can do as they like, and assume from that that 
the distribution of wealth in the economic sense of the 
term is a matter of human law— "a matter of human 
institution solely." 

Such a fallacy could not have been proposed by Mill, 
himself a trained logician, nor could it have passed current 
with the trained logicians who since his time, leaving 



434 THE DISTEIBUTION OF WEALTH. Book IV. 

their logic behind them, have written treatises on political 
economy, had it not been for the fact that in the scholastic 
political economy the real nature of the distribution of 
wealth has been slurred over and the question of what 
natural laws may have to do with it utterly ignored. Let 
us endeavor to settle this : 

The original meaning of the word distribution is that of 
a division into or among. Distribution is thus an action, 
presupposing an exertion of will, and involving a power 
of giving that will effect. Now as to things already there, 
that is to say with wealth that has been already produced, 
it is perfectly clear that their division or distribution 
among men is determined entirely by human will backed 
by human force. With such a distribution nature is not 
concerned and in it she takes no part. Things already 
there, wealth ali-eady produced, belong to nature only in 
what logicians would call their accident, matter. But 
while still subject to material laws, such as the law of 
gravitation, who shall possess or enjoy them is a matter 
purely of human will and force. Mankind can place them 
at the disposal of whomsoever they please and on whatever 
terms. 

Thus, distribution in this sense, the distribution of things 
already in existence, is indeed a matter solely of human 
will and power. If I would know the law of distribution 
in this sense of human law, I cannot look to political 
economy, but where settled institutions have not grown 
up or are discarded, must look to the will of the strongest. 
Where in civilized society it is human institutions that 
decide among whom wealth shall be divided, as for 
instance in case of an insolvent, in case of the estate of 
a deceased person, or in case of controverted ownership, 
the municipal law governing such distribution is to be 
found recorded in written or printed statutes, in the 
decisions of judges or in traditions of common use and 



Chaj}. IT. THE NATUEE OF DISTRIBUTION. 435 

wont. It is in eases of dispute authoritatively expounded 
by courts, and is carried into effect by sheriffs or constables 
or other officials having at their back the coercive power 
of the state, with its sanctions of seizure of property and 
person, fine, imprisonment and death. 

But from its very rudest expression, where what obtains 

is 

" The good old rule, 

the simple plan, 

That they should take who have the power, 
And they should keep who can," 

to societies where the most elaborate machinery for declar- 
ing and enforcing human laws of distribution exists, such 
laws of distribution always are and always must be based 
upon human will and human force. 

How then can we talk of natural laws of distribution ? 
Laws of natm^e are not written or printed, or carved on 
pillars of stone or brass. They have no parliaments, or 
legislatures, or congresses to enact them, no judges to 
declare them, no constables to enforce them. What then 
can we really mean by natural laws of the distribution of 
wealth 1 What is the mode or method by which without 
human agency wealth may be said to be distributed by 
natural law, and without human agency, among individuals 
or classes of individuals ? Here is the difficulty that not 
having been cleared up in economic works has given 
plausibility to the assumption into which the scholastic 
economy has fallen in assuming that the only laws of 
distribution with which political economy can deal are not 
natural laws at all, but only human laws— an assumption 
that must bring any science of political economy to an end 
with production. 

Laws of nature, as was explained in the first part of this 
work (Book I., Chapter VIII.), are the names which we 
give to the invariable uniformities of coexistence and 



436 THE DISTEIBUTION OF WEALTH. Booh IV. 

sequence whicli we find in external things, and which we 
call laws of nature because our reason apprehends in them 
the evidence of an originating will, preceding and superior 
to human will. Let us call in the aid of that most potent 
instrument of political economy, imaginative experiment, 
to see if we do not find evidences of such laws of nature, 
the only laws with which a true science of political economy 
can deal, in the matter of the distribution of wealth : 

A shifting of desert sands reveals to a roving tribe 
wealth produced in a long dead civilization — rings, coins, 
bracelets, precious stones and delicately carved marbles. 
The things are there. They have been produced. The 
tribesmen individually or collectively can do with them as 
they like— can place them at the disposal of whomsoever 
they please, and on whatever terms. Nature will not 
interfere. The desert sand and desert sky, the winds that 
sweep across it, the sun and moon and stars that look 
down on it, the living things that prowl or crawl over it, 
will make no remonstrance Mdiatever the tribesmen may 
choose to do with this wealth that is there — that has 
already centuries ago been produced. 

But things freshly produced this day or this minute are 
as truly here as things produced centuries ago. Why 
should not mankind individually or collectively do with 
them also as they like; place them at the disposal of 
whomsoever they please and on whatever terms they 
choose? They could do so with no more remonstrance 
from the things themselves or from external nature than 
would attend the rifling of Egyptian tombs by Bedouins. 
Why should not civilized men rifle the products of farm or 
mine or mill as soon as they appear ? Human law inter- 
poses no objection to such collective action, for human 
law is but an expression of collective human will, and 
changes or ceases with the changes in that will. Natural 
law, so far as it is comprehended in what we call physical 



Chcq}. 11. THE NATURE OF DISTRIBUTION. 437 

law, interposes no objection— thelawsof matter and energy 
in all their forms and combinations pay no heed whatever 
to human ownership. 

Yet it needs no economist to tell ns that if in any country 
the products of a living civilization were treated as the 
Bedouins treat the products of a dead civilization, the 
swift result would be fatal to that civilization— would be 
poverty, famine and death to the people individually and 
(collectively. This result would come utterly irrespective 
of human law. It would make no difference whether the 
appropriation of ^'things once there" without regard to 
the will of the producer were in defiance of human law or 
under the sanctions of human law ; the result would be 
the same. The moment producers saw that what they 
produced might be taken from them without their consent, 
production would cease and starvation begin. Clearly 
then, this inevitable result is not a consequence of human 
law, but a consequence of natural law. Not a consequence 
of the natural laws of matter and motion, but a consequence 
of natural laws of a different kind— laws no less immutable 
than the natural laws of matter and motion. 

For natural law is not aU comprehended in what we call 
physical law. Besides the laws of nature which relate to 
matter and energy, there are also laws of nature that relate 
to spirit, to thought and will. And should we treat the 
present products of farm or mine or mill or factory as we 
may treat the products of a dead civilization, we shaU feel 
the remonstrance of an immutable law of nature wherever 
we come in conflict with the moral law. This is not to say 
that any division of wealth that mankind individually or 
collectively may choose to make will be interfered with or 
prevented. Things once here, once in existence in the 
present, are absolutely in the control of the men of the 
present, and "they can place them at the disposal of 
whomsoever they please and on whatever terms." Any 



438 THE DISTEIBUTION OF WEALTH. BooTcIV. 

remonstrance of the moral law of nature to their action 
will not show itself in, or in relation to, these identical 
things. But it will show itself in the future— in checking 
or preventing the production of such things. Things once 
produced are then and there already in existence, and may 
be distributed as mankind may will. But the things on 
which the natural laws of distribution exert their control 
are not things already produced, but things which are 
being, or are yet to be, produced. 

In other words, production in political economy is not 
to be conceived of as something which goes on for a while 
and then stops, when its product wealth has been brought 
into being ; nor is it to be conceived of as something related 
only to a production that is finished and done. Both 
production and distribution are properly conceived of as 
continuous, resembling not the drawing of water in a 
bucket but the drawing of water through a pipe — or better 
still, in the conveyance of water over an elevation by 
means of a bent pipe or siphon, of which the shorter arm 
may stand for production and the longer for distribution. 
It is in our power to tap this longer arm of the pipe at 
any point below the highest, and take what water is already 
there. But the moment we do so, the continuity of the 
stream is at an end, and the water will cease to flow. 

Production and distribution are in fact not separate 
things, but two mentally distinguishable parts of one 
thing— the exertion of human labor in the satisfaction of 
human desire. Though materially distinguishable, they are 
as closely related as the two arms of the siphon. And as it 
is the outflow of water at the longer end of the siphon that is 
the cause of the inflow of water at the shorter end, so it is 
that distribution is really the cause of production, not 
production the cause of distribution. In the ordinary 
course, things are not distributed because they have been 
produced, but are produced in order that they may be 



ClMi-). II. THE NATURE OF DISTRIBUTION. 439 

distributed. Thus interference with the distribution of 
wealth is interference with the production of wealth, and 
shows its effect in lessened production. 

To use again the analogy supplied by our material 
frames. Blood stands in the same relation to the physical 
body that wealth does to the social body, distributing 
throughout all parts of the physical frame potentialities 
akin to those which wealth carries through the social 
frame. But though the organs that distribute this vital 
current are different from the organs that produce it, their 
relations are so intimate that seriously to interfere with 
the distribution of the blood is necessarily to interfere 
with its production. Should we say of the blood that 
passes into the great pumping station, the heart, ^' It has 
been produced ; it is here, and we may do with it as we 
please ! " and acting on the word, divert it from its com'se 
through the organs of distribution— at once the great 
pump ceases to beat and the organs that produce blood 
lose their power and begin to decompose. 

And as to pierce the heart and divert the blood that has 
been produced from the natural course of its distribution 
is to bring about the death of the phj^sical organism most 
swiftty and certainly, so to interfere with the natural laws 
of the distribution of wealth is to bring about a like death 
of the social organism. If we seek for the reason of ruined 
cities and dead civilizations we shall find it in this. 



CHAPTER III. 

THE COMMON PERCEPTION OF NATURAL 
LAW IN DISTRIBUTION. 

SHOWING THE COMMON AND INERADICABLE PERCEPTION OF 
NATURAL LAWS OP DISTRIBUTION. 

Mill's admission of natural law in his argument that distribution 
is a matter of human law — Sequence and consequence — Human 
will and the will manifest in nature— Inflexibility of natural laws 
of distribution— Human will powerless to affect distribution— 
This shown by attempts to affect distribution through restriction 
of production— Mill's confusion and his high character. 

T would seem impossible for a man of the logical 
acumen and training of John Stuart Mill to accept 
in deference to preconceived opinion, and to justify by such 
a transparent fallacy, such an incongruous conclusion 
as that while the laws of political economy relating to 
production are naturrJ laws, the laws relating to distribu- 
tion are human laws, without at least a glance towards the 
truth. And such a sidelong glance we find in the latter 
part of the argument which in the last chapter was given 
in full. 

To bring this more clearly into view let me print it 
again, supplying the elisions in brackets, and emphasizing 
with italics words to which I would direct special attention : 

We have here [in political economy] to consider, not the causes, 
but the consequences, of the [liuman] rules according to which wealth 

440 



Cluii). III. NATUEAL LAW IN DISTRIBUTION. 441 

may be distributed. Those \_consequences], at least, are as little 
arbitrary, and have as much the character of physical laws, as the 
laws of production. Human beings can control their own acts, but 
not the consequences of their acts either to themselves or to others. 
Society can subject the distribution of wealth to whatever rules it 
thinks best; but what j>mcf('c«Z results will flow from the operation of 
those rules, must be discovered, like any other physical or mental 
truths, by observation and reasoning. 

Here we have, what would hardly be expected from the 
author of " Mill's System of Logic/' an example of that 
improper use of the word consequence where sequence is 
really meant, which I referred to in Chapter VIII. of 
Book I. 

To recall what was there said : A sequence is that which 
foUows. To say that one thing is a sequence of another 
is to say that it has to its antecedent a relation of succession 
or coming after, but is not necessarily to say that this 
relation is invariable or causal. But a co>«sequence is that 
which f ollows/>'o;«. To say that one thing is a consequence 
of another is really to say that it has to its antecedent not 
merely a relation of succession, but of invariable succes- 
sion—the relation namely of effect to cause. 

Our disposition to prefer the stronger word leads in 
common speech to the frequent use of consequence where 
merely sequence is really meant, or to speak of a result as 
the consequence of what we know can be only one of the 
causal elements in bringing it about. If a boy break a 
window-pane in throwing a stone at a cat, or a man is 
drowned in going in to swim, we are apt to speak of the 
one thing as a consequence of the other, though we know 
that stones are constantly thrown at cats without break- 
ing windows and that men go in to swim without being 
drowned, and that the result in the particular case was not 
due to the human action alone, but to the concurrence with 
it of other causes, such as the force and dii*ection of wind 
or tide, the attraction of gravitation, etc. This tendency 



442 THE DISTRIBUTION OF WEALTH. BooTcIV. 

to a loose use of tiie word consequence is of little or no 
moment in common speech, where what is really meant is 
well understood ; but it becomes a fatal soiu'ce of confusion 
in philosophical writing, where exactness is necessary, not 
merely that the writer be understood by the reader, but 
that he may really understand himself. 

Now, what are the things which Mill here speaks of as 
consequences of human rules according to which wealth 
may be distributed : the things which (and not the causes 
of the human rules) we have, he says, to consider in 
political economy, and which he tells us have as much the 
character of physical laws as the laws of production, and 
"must be discovered, like any other physical or mental 
truths, by observation and reasoning " ? They follow, and 
are thus sequences of human action, or as Mill subsequently 
speaks of them, '' practical results," appearing as invariable 
uniformities in the actual outcome of man's efforts to 
regulate the distribution of wealth. But though sequences 
they clearly are not con-sequences of human action. To 
say that human beings can control their own acts but not 
what follows from those acts would be to deny the laws of 
causation. Since these invariable uniformities appearing 
in the practical results or sequences of man's action cannot 
be related as effects to man's action as cause, they are not 
properly con-sequences of man's action, but con-sequences 
of something independent of man's action. 

The truth that MiR vaguely perceives and confusedly 
states in these sentences is in direct contradiction of his 
assertion that the distribution of wealth is a matter of 
human institution solely. It is, that the distribution of 
wealth is not a matter of human institution solely, and 
does not depend upon the laws and customs of society 
alone ; that though human beings may control their own 
acts towards the distribution of wealth, and frame for 
their action such laws as the ruling portion of the 



Cliaj). III. NATUEAL LAW IN DISTEIBUTION. 443 

community may wish, yet the practical results will not 
depend on this human action alone, but on that as 
combined with and dominated by another more permanent 
and powerful element— a something independent of human 
action that modifies the practical results of human action 
towards the distribution of wealth, as gravitation modifies 
the flight of a cannon ball. 

Now these invariable sequences which come out in the 
practical results of man's action, and which we know only 
as effects, and cannot relate to man's action as cause, we 
are compelled by the mental necessity which demands a 
cause for every effect to refer to a causal antecedent in 
the nature of things, which, as explained in Book I., we 
call a law of nature. That is to say, invariable uniformities, 
modifying the effects of all human action, such as Mill 
confusedly recognizes in these sentences, are precisely 
what, apprehending them as manifestations of a higher 
than human wiU, we style laws of nature, or natural laws. 

Mill's own definition of a law of nature ("System of 
Logic," Book III., Chapter IV.) is a uniformity in the 
course of natm*e, ascertained by what is regarded as a 
sufficient induction, and reduced to its most simple 
expression. Thus if observation and reasoning discover 
in the actual phenomena or practical results of man's 
action in the distribution of wealth uniformities which 
swerve or destroy the effect of human action not in exact 
conformity with them, these are the natural laws of 
distribution as clearly as similar sequences or uniformities 
which observation and reasoning discover in the phe- 
nomena of production are the natural laws of production. 
And what Mill is vaguely thinking of and confusedly 
writing about are clearly the very natural laws of distri- 
bution which he says do not exist. 

In truth, the distribution of wealth is no more " a matter 
of human institution solely" than is the production of 



444 THE DISTRIBUTION OF WEALTH. Book IV. 

wealth. That human beings can control their own acts is 
true in one case as in the other, only in the same sense 
and to the same degree. Our will is free. But human 
will can only affect external natui-e by taking advantage 
of natural laws, which in the very name we give them 
carry the implication of a higher and more constant will. 
A boy may throw a stone or an artilleryman fire a cannon 
ball at the moon. If the result depended solely on the 
human action, both ball and stone would reach the moon. 
But the governance of natm-al law— without conformity 
to which even such action as throwing a stone or iiring 
a cannon ball cannot take place— continuing to modify 
results, brings both to the ground again, the one in a few 
feet and the other in a few thousand feet. 

And the natural laws which political economy discovers, 
whether we call them laws of production or laws of 
distribution, have the same proof, the same sanction and 
the same constancy as the physical laws. Human laws 
change, but the natural laws remain, the same yesterday, 
to-day and to-morrow, world without end ; manifestations 
to us of a will that though we cannot obtain direct know- 
ledge of it through the senses,we can yet see never slumbers 
nor sleeps and knows not change in jot or tittle. 

If I can prove that this inflexibility to human effort is 
characteristic of the laws of distribution that political 
economy seeks to discover, I have proved finally and 
conclusively that the laws of distribution are not human 
laws, but natural laws. To do this it is only necessary 
to appeal to facts of common knowledge. 

Now the three great laws of distribution, as recognized 
by all economists, though they are sometimes placed in 
different order, are the law of wages, the law of interest 
and the law of rent. Into these three elements or factors, 
the entire result of production is by natural law distributed. 
Now I do not of course mean to say that human law may 



Chap. III. NATUEAL LAW IN DISTRIBUTION. 445 

not take from the part wliicli under the natural law of 
distribution might be enjoyed by one man or set of men 
and give it to another, for as I have already said aU 
wealth or any wealth from the moment it is produced is 
entirely at the disposition of human law, and mankind 
can do with it as they please. What I mean to say is that 
human law is utterly powerless directly to alter distribu- 
tion, so that the laborer as laborer will get more wages or 
less wages, the capitalist as capitalist more interest or less 
interest, or the landowner as landowner more rent or less 
rent, or in any way alter the conditions of distribution 
fixed by natural law under existing industrial conditions. 
This has been tried again and again by the strongest 
governments, and is to some extent still being tried, but 
always unavailingly. 

In England, as in other countries, there have been at 
various times attempts to regulate wages by law, sometimes 
to decrease them and sometimes to increase them below 
or above the level fixed at the time by natural law. But 
it was found that in the one case no law could prevent the 
laborer from asking and the employer from paying more 
than this legal rate when the natural law, or as we usually 
say the equation of demand and supply, made wages higher, 
and that no law, even when backed by grants in aid of 
wages, as was done in England during the beginning of 
this century, could in the opposite case keep wages at a 
higher rate. So it has proved with interest. There have 
been numberless attempts to keep down interest, and the 
State of New York retains to this day on her statute-book 
a law limiting, though with considerable holes, the rate of 
interest to six per cent. But such laws never have suc- 
ceeded and do not now succeed in keeping interest below 
the natural rate. Lenders receive and borrowers pay that 
rate in the form of sales, premiums, discounts and bonuses, 
where the law forbids them to do it openly. So, too, in 



446 THE DISTEIBUTION OF WEALTH. Book IV. 

the case of rent. The British Parliament has recently at- 
tempted to reduce agricultural rent in certain cases in Ire- 
land by instituting officials with power to fix '' fair rents "— 
what should be paid by the tenant to the landlord. They 
have in many cases cut down the income of certain of the 
landlords, but they have not lessened rent. They have 
merely divided what before went to the landlord between 
him and the existing tenant, and a new tenant must pay, 
part in rent to the landlord and part in tenant right to the 
existing tenant, as much for the use of the land as it would 
have commanded if this attempt to reduce rent had not 
been made. 

And so it has been with attempts of human law to fix 
and regulate prices, which involve the same great laws of 
distribution in combined forms. Human law is always 
potent to do as mankind will with what has been produced, 
but it cannot directly affect distribution. That it can 
reach only through production. 

Nothing indeed could be more inconsistent with common 
perceptions than this notion into which the scholastic 
economists have fallen, that the distribution of wealth is 
less a matter of natural law than the production of wealth. 
The fact is (the reason of the fact will be considered 
hereafter) that the common perceptions of men recognize 
the immutability of the natural laws of distribution more 
quickly and more certainly than of the natural laws of 
production. If we look over the legislation by which the 
ruling portion of our communities have striven to affect 
the distribution of wealth, we shall find that (as if conscious 
of its hopelessness) they have seldom if ever tried directly 
to affect the distribution of wealth ; but have tried to affect 
distribution indirectly through production. 

An English Elizabeth or James wishes to alter the 
practical outcome of the distribution of wealth in favor 
of an Essex or Villiers, and to accomplish this imposes 



Chaj). HI. NATURAL LAW IN DISTRIBUTION. - 447 

restrictions upon the production of gold lace or playing 
cards. A Russian Czar desires to alter the distribution of 
wealth in favor of one of his boyars, and seeks that end 
by making a tract of land the property of his favorite and 
forbidding peasants to leave it, thus preventing them from 
engaging in production except on his terms. Or, to come 
nearer the present in time and place, a Carnegie or a 
Wharton wishes to alter distribution in his favor so largely 
that he may play at building libraries and endowing 
schools of political economy ( f ) ; he seeks his end by getting 
Congress to restrict the production of iron, steel or nickel, 
by imposing a duty upon importation. 

But it is not alone in the sentences I have reprinted 
that Mill shows an undefined consciousness that the laws 
of the distribution of wealth which it is the proper business 
of political economy to discover are natural laws, not 
human laws. Though he does not retract his statement 
that " the distribution of wealth depends on the laws and 
customs of society," and formally proceeds ''to the con- 
sideration of the different modes of distributing the produce 
of land and labor which have been adopted in practice or 
may be conceived in theory," yet we find him afterwards 
(Book II., Chapter III., Sec. 1) speaking of laws according 
to which " the produce distributes itself by the spontaneous 
action of the interests of those concerned." If there be 
laws according to which produce distributes itself, they 
certainly cannot be human laws. King Canute, we are 
told, once tried by edict to turn back the tide ; but who 
has ever dreamed that produce, whether houses or metals 
or wheat or hay, or even pigs or sheep, could by ukase or 
irade, act of Parliament or resolution of Congress, be made 
to distribute itself f 

The truth is that in the long discussion of the distribution 
of wealth, which in John Stuart MiU's ''Principles of 
Political Economy " succeeds to what I have quoted, he 



448 . THE DISTEIBUTION OF WEALTH. Boole IV. 

neither follows what he formally states, that distribution 
is a matter of hnman institution solely, and depends on 
the laws and customs of society ; nor yet does he follow 
what he confusedly admits, that it is a matter of natm-al 
law. Passing to a consideration of the origin of private 
property in human law, and beginning with Communism 
and Socialism, the Moravians, the Rappists, the followers 
of Louis Blanc and Cabet, St. Simonism and Fourierism, 
he rambles along, mixing what properly belongs to the sci- 
ence of political economy with discussions of competition 
and custom, slavery, peasant proprietors, metayers, cot- 
tiers, the means of abolishing cottier tenancy and popular 
remedies for low wages, without either clearly giving the 
laws of distribution or saying what they are. And the 
reader who wishes to discover what the ablest and most 
systematic of scholastic economists takes to be the laws of 
distribution of wealth must after going through this mass 
of dissertation keep on through some forty chapters or 
600 pages more, and finally fish them out for himself— 
only to find when he gets them or thinks that he gets 
them, that they do not correlate with each other. 

As I have said, I only speak of John Stuart Mill as the 
best example of what has passed as the scientific exposi- 
tion of political economy. The same absence of a, really 
scientific method— that is to say the same want of order 
and precision— will be found in the treatment of distribu- 
tion in all the treatises of the school of economists, now 
called the Classical school, of which Mill may be deemed 
the culmination. And it is to be found in even worse 
degree in the so-called Historical and Austrian schools 
which have within recent years succeeded the school of 
Mill in all our great universities. They are indeed so far 
behind the predecessors at whom they affect to sneer, that 
they make no attempt even at order and precision. Wlio- 



Chap. III. NATURAL LAW IN DISTRIBUTION. 449 

ever would have an economic contrast suggested to him 
like that of Hamlet's "Hyperion to a Satyr/' let him 
compare John Stuart Mill's ''Principles of Political 
Economy" with the most pretentious of recent ''Prin- 
ciples of Economics." 



CHAPTER IV. 

THE REAL DIFFERENCE BETWEEN LAWS OF 
PRODUCTION AND OF DISTRIBUTION. 

SHOWING THAT DISTRIBUTION HAS REFERENCE TO ETHICS, 
WHILE PRODUCTION HAS NOT. 

Tho laws of production are physical laws ; the laws of distribution 
moral laws, concerned only with spirit— This the reason why the 
immutable character of the laws of distribution is more quickly 
and clearly recognized. 

'ILL is clearly wrong in the distinction which he seeks 
to draw between the production of wealth and the 
distribution of wealth with regard to the kind of laws 
which it is the proper business of these departments of 
political economy to discover. 

But there is an important difference between them 
which, although he has failed to distinguish it, probably 
lies in vague way at the bottom of the notion that the laws 
of production and the laws of distribution are different 
kinds of laws. It is, that the branch of the science which 
treats of the distribution of wealth is that in which the 
relations of political economy to ethics are clearer and 
closer than in that branch which treats of production. 

In short, the distinction between the laws of production 
and the laws of distribution is not, as is erroneously taught 
in the scholastic political economy, that the one set of laws 

450 



Chap. IV. PHYSICAL LAWS AND MORAL LAWS. 451 

are natural laws, and the other h^^man laws. Both sets 
of laws are laws of nature. The real distinction is pointed 
out in the last chapter, that the natural laws of production 
are phj^sical laws and the natural laws of distribution are 
moral laws. And it is this that enables us to see in 
political economy more clearly than in any other science, 
that the government of the universe is a moral government, 
having its foundation in justice. Or, to put this idea into 
terms that fit it for the simplest comprehension, that the 
Lord our God is a just God. 

In considering the production of wealth we are con- 
cerned with natural laws of which we can only ask what 
is, without venturing to raise the question of what ought 
to be. Even if we can imagine a world in which beings 
like ourselves could maintain an existence and satisfy 
their material desii*es in aiiy other way than by the 
application of labor to land under relations of uniform 
sequence not substantially different from those invariable 
sequences of matter and motion and life and being which 
we denominate physical laws, we cannot venture to apply 
to these physical laws, of which we can primarily say only 
that they exist, any idea of ought. Even in matters as to 
which we can imagine considerable differences between 
the physical uniformities that we observe in this world 
and those that might exist in a world in other respects 
resembling this — such for instance as might be brought 
about by a change in the distance of our earth from the 
sun, or in the inclination of its axis to the ecliptic, or in 
the density of its atmospheric envelop ; or even by a 
change in such uniformities as seem to us to involve 
exceptions to a more general uniformity, like that exception 
to the general law of the contraction of water in cooling 
which causes it at the freezing-point to expand — there is 
nothing that has any reference to right or justice, or that 
arouses in us any perception of ought or duty. 



452 THE DISTEIBUTION OF WEALTH. Book IV. 

For the perception of right or justice, the recognition 
of ought or duty, has no connection with or relation to two 
of the three elements or categories into which we may by 
analysis resolve the world as it is presented in conscious- 
ness to our reasoning faculties. That is to say, right or 
justice, ought or duty, do not and cannot have any relation 
either to matter or to energy, but only to spirit. They 
presuppose conscious will, and cannot be extended beyond 
the limits in which we recognize or assume a will having 
freedom to act. 

Thus is it that in considering the nature of wealth or 
the production of wealth we come into no direct and 
necessary contact with the ethical idea, the idea of right 
or justice. It is only when and as we endeavor to pierce 
behind the invariable uniformities of matter and motion 
to which we give the name of laws of nature and recognize 
them in our thought as manifestations of an originating 
or creative spirit, for which our common name is God, in 
its dealing with other, and though inferior, essentially 
spiritual beings, that the idea of right or justice can have 
any place in that branch of political economy which deals 
with the nature of wealth or the laws of its production. 

But the moment we turn from a consideration of the 
laws of the production of wealth to a consideration of the 
laws of the distribution of wealth the idea of ought or 
duty becomes primary. All consideration of distribution 
involves the ethical principle ; is necessarily a considera- 
tion of ought or duty— a consideration in which the idea 
of right or justice is from the very first involved. And 
this idea cannot be truly conceived of as having limits or 
being subject to change, for it is an idea or relation, like 
the idea of a square or of a circle or of parallel lines, which 
must be the same in any other world, no matter how far 
separated in space or time, as in this world. It is not 
without reason that in our colloquial use of the words we 



Chap. IV. PHYSICAL LAWS AND MORAL LAWS. 453 

speak of a just man as "a square man" or '^a straight 
man." As Montesquieu says': 

Justice is a relation of congriiity which really subsists between 
two things. This relation is always the same, whatever being con- 
siders it, whether it be God, or an angel, or lastly a man. 

This I take to be the reason of the fact which in Chapter 
II. of this Book was referred to— that the immutable char- 
acter of the laws of distribution is even more quickly and 
clearly recognized than the immutable character of the 
laws of production. Princes, politicians and legislatures 
attempt to influence distribution, but they always try to do 
it, not by aiming at distribution directly but by aiming at 
distribution indirectly, through laws that directly affect 
production. 



CHAPTER V. 
OF PROPERTY. 

SHOWING THAT PROPERTY DEPENDS UPON NATURAL LAW. 

The law of distribution must be tlie law which determines ownership 
—John Stuart Mill recognizes this ; but extending his error treats 
property as a matter of human institution solely— His assertion 
quoted and examined— His utilitarianism— His further contra- 
dictions. 

SINCE the distribution of wealth is an assignment of 
ownership, the laws of distribution must be the laws 
which determine property in the things produced. Or to 
put it in another way, the principle which gives ownership 
must be the principle which determines the distribution 
of wealth. Thus what we may speak of in political economy 
as the law of property and the law of distribution are not 
merely laws of the same kind, springing from the same 
principle, but are in realit}'' different expressions of the 
same fundamental law. Hence, in considering the origin 
and basis of property we come again to the question, is it 
the law of nature or the laws of man that it is the office of 
the science of political economy to discover ? To say that 
the distribution of wealth is " a matter of human enactment 
solely" is to say that property can have no other basis 
than human law ; while to admit any basis of property in 
laws of nature is to say that the distribution of wealth is 
a matter of natural law. 

454 



Chaj). V. OF PROPERTY. 455 

It is another evidence of the superiority of John Stuart 
Mill in logical acumen that he seems to have been the 
only one of the accredited economic writers who has 
recognized this necessary relation between the laws of 
distribution and the origin of property. From the intro- 
ductory section of his Book " Distribution," the section I 
have ah'eady quoted in full, he proceeds at once to a 
consideration of the origin of property, and indeed the 
first two chapters of the Book are entitled " Of Property." 

But he is consistent in error. The same want of 
discrimination that leads him to treat distribution as a 
matter of human institution solely, leads him to treat 
property as a matter of human institution solely. Hence, 
his consideration of property does not, as it should, help 
him to see the incongruity of the notion that while the 
laws of production are natural laws the laws of distribution 
are human laws; but gives to that error such seeming 
plausibility as one error may give to another. Contra- 
dictions and confusions are however as marked in his 
discussion of property as in his discussion of distribution. 

This is shown in the introductory paragraph of his 
treatment of property. Book II., Chapter I., Sec. 2, which 
is as follows. 

Private property, as an institution, did not owe its origin to any of 
those considerations of utility, -which plead for the maintenance of it 
when established. Enough is known of rude ages, both from history 
and from analogous states of society in our own time, to show, that tri- 
bunals (which always precede laws) were originally established, not 
to determine rights, but to repress violence and terminate quarrels. 
With this object chiefly in view, they naturally enough gave legal 
effect to first occupancy, by treating as the aggressor the person who 
first commenced violence, by turning, or attempting to turn, another 
out of possession. The preservation of the peace, which was the 
original object of civil government, was thus attained; while by 
confirming, to those who already possessed it, even what was not the 
fruit of personal exertion, a guarantee was incidentally given to them 
and others that they would be protected in what was so. 



456 THE DISTRIBUTION OF WEALTH. Book IV. 

All this I deny. It is in fact blank contradiction. Let 
the reader look over and consider it. In the first sentence 
we are told that private property did not originate in 
considerations of utility. In the second, that " tribunals 
(which always precede laws) were originally established, 
not to determine rights, but to repress violence and 
terminate quarrels." In the third, that they did this by 
treating as the aggressor the person who first commenced 
violence. In the fourth, that the preservation of the peace 
was the original object of such tribunals, and that by 
securing possession where there was no right they 
incidentally secured possession where there was right. 

Thus, the first sentence asserts that private property 
did not originate in considerations of utility, and the three 
succeeding sentences that it did. For when all considera- 
tion of right is eliminated what remains as a reason for 
the preservation of the peace by the repression of violence 
and the termination of quarrels, if not the consideration 
of utility ? What Mill tells us, is that society originally 
acted on the principle of the schoolmaster who says, " If I 
find any fighting I will not stop to ask the right or wrong, 
but will flog the boy who struck the first blow, /or I cannot 
have the school thrown into disorder." If this is not a 
substitution of the principle of utility for the principle of 
right, what is it? And to this contradiction of himself, 
Mill adds that by confirming wrongful possession, society 
incidentally guarantees rightful possession!— something 
in the nature of things as impossible as that two railway 
trains should pass each other on a single track. 

The fact is that MiU in his consideration of property is 
caught in the toils of that utilitarian philosophy which 
seeks to make the principle of expediency take the place 
of the principle of justice. Men can no more do this 
consistently than they can live without breathing, and 
Mill in his very attempt to base the institution of property 



Chap. V. OF PROPERTY. 457 

on human law is driven despite himself into recognizing 
the moral law, and into talking of right and wrong, of 
ought and ought not, of just and unjust. Now these are 
terms which imply a natural law of morality. They can 
have no meaning whatever if expediency be the basis of 
property and human law its warrant. 

The contradictions of this paragraph are shown through 
the whole consideration of property it introduces. While 
he strives to treat property as a matter of human institution 
solely, yet over and over again we find Mill forced to 
abandon this position and appeal to something superior 
to human institution— to right or justice. 

Thus, in what follows the paragraph I have quoted, we 
find statements utterly contradictory of the notion that 
property has its origin in expediency and is determined 
by human enactment. 

In the very next section to that in which we are told that 
the origin of property is not in justice but in expediency, 
not in the desire to determine rights, but the desii'e to 
repress violence, we are told (the italics being mine) : 

The social arrangements of modern Europe commenced from a 
distribution of propertywlieli was the result, not of j«s^ partition, or 
acquisition by industry, but of conquest and violence : and notwith- 
standing what industry has been doing for many centuries to modify 
the work of force, the system still retains many and large traces of 
its origin. The laws of property have never yet conformed to the 
principles on which the justification of private property rests. They 
have made property of things which never ought to be made property, 
and absolute property where only a qualified property ought to exist. 

Here we are told that, as a matter of fact, human laws 
of property did not originate in the expediency of repressing 
violence, but in violence itself ; that they have never con- 
formed to what we can only understand as the natural law 
of property, but have ^dolated that natural law, by treating 
as property things that under it are not property. For to 



458 THE DISTRIBUTION OP WEALTH. Book IV. 

say that a human law ought to be different from what the 
legislature enacts is to say that there is a natural law by 
which human laws are to be tested. 

What indeed that natural law of property is by which 
all human enactments are to be tested, Mill a little later 
shows himself to be conscious of, for he says : 

Private property, in every defense made of it, is supposed to mean 
the guarantee to individuals of the fruits of their own labor and 
abstinence. 

And this basis of a natural right of property— a right 
which is unaffected by and independent of all human 
enactments— is still further on even more definitely and 
clearly stated : 

The institution of property, when limited to its essential elements, 
consists in the recognition, in each person, of a right to the exclusive 
disposal of what he or she have produced by their own exertions, or 
received, either by gift or by fair agreement, without force or fraud, 
from those who produced it. The foundation of the whole is, the 
right of producers to what they themselves have produced. 

The right of property includes, then, the freedom of acquiring 
by contract. The right of each to what he has produced, implies a 
right to what has been produced by others, if obtained by their free 
consent. 

After thus conceding everything to natural law, Mill 
becomes concerned again for human law, and appeals to 
the " categorical imperative " of Kant, the ought of moral 
law, to give sanction under certain circumstances to 
human law, declaring that : 

Possession which has not been legally questioned within a moder- 
ate number of years, ought to be, as by the laws of all nations it is, 
a complete title. 

Then, recognizing for a moment the incongruity of 
making legal possession— that is to say possession by 



Chap. V. OF PROPERTY. 459 

virtue of human law— equivalent to possession by virtue 
of natural law, he continues : 

It is scarcely needful to remark, that these reasons for not dis- 
turbing acts of injustice of old date, cannot apply to unjust systems 
or institutions ; since a bad law or usage is not one bad act, in the 
remote past, but a perpetual repetition of bad acts, as long as the law 
or usage lasts. 

Now property, Mill himself has always spoken of as a 
system or institution, which it certainly is. And he has 
just before stated that the existing systems or institutions 
of property have their source in violence and force, and 
therefore are certainly in his own view unjust and bad. 
Hence what he tells us here is in plain Enghsh that the 
sanction of prescription cannot be pleaded in defense of 
property condemned by the natural or moral law. This is 
perfectly true, but it is in utter contradiction of the notion 
that property is a matter of human law. 



CHAPTER VI. 
CAUSE OF CONFUSION AS TO PROPERTY. 

SHOWING WHY AND HOW POLITICAL ECONOMISTS PELL INTO 
SUCH CONFUSIONS V>^ITH REGARD TO PROPERTY. 

Mill blinded by the pre-assumption that land is property — He all but 
states later the true principle of property, but recovers by substi- 
tuting in place of the economic term "land," the word in its col- 
loquial use — The different senses of the word illustrated from the 
shore of New York harbor— Mill attempts to justify property in 
land, but succeeds only in justifying property in wealth. 

IET us pause a moment before we go further in our 
A examination of Mill's reasoning. "What is it that so 
perplexes this trained logician and honestly minded man, 
involving him in such utter contradictions and confusions 
when he endeavors to trace the basis of property ? It is 
evidently the same thing that has prevented all the 
scholastic economists, both those who preceded and those 
who have succeeded him, from giving any clear and 
consistent statement of the laws of distribution or of the 
origin of property. This is a pre-assumption they cannot 
bring themselves to abandon— the pre-assumption that 
land must be included in the category of property and a 
place found in the laws of distribution for the income of 
landowners. Since natural law can take no cognizance of 
the ownership of land, they are driven in order to support 

460 



Chap.VI. CAUSE OF CONFUSION AS TO PROPERTY. 461 

this pre-assumption to treat distribution and property as 
matters of human institution solely. 

Mill, who though befogged by his utilitarian philosophy 
is in many respects the superior of all these writers, starts 
on his investigation of distribution and property with the 
same pre-assumption, or, to use our colloquial phrase, 
with the same " string tied to his leg." He had been, as 
they all have been— from the really great Adam Smith to 
the most recent pui'veyors of economic nonsense in Anglo- 
German jargon— accustomed to regard property in land 
as the most certain, most permanent, most tangible, of all 
property— that which the lawyers call real property, a,nd 
which in common speech, where the unqualified word 
" property " usually means landed property, is recognized 
as the highest expression of ownership. And his logic was 
not strong enough to permit him even at its call to lay 
rude hands upon what to Englishmen of his class and 
time was the most sacred of institutions — what the very 
Ark of the Covenant was to the pious Jew. He did indeed, 
come so near questioning it as to excite the dismay of his 
contemporaries who deemed him a radical of radicals for 
utterances that squint towards the truth. But he always 
draws back from uttering it. 

The real basis of propertj^, the real fundamental law of 
distribution, is so clear that no one who attempts to reason 
can utterly and consistently ignore it. It is the natural 
law which gives the product to the producer. But this 
cannot be made to cover property in land. Hence the 
persistent effort to find the origin of property in human 
law and its base in expediency. It is evident, even where 
Mill speaks of property generally, as he has done in what 
I have to this point commented on, that the real cause of 
his contradictions and confusions is that he has always in 
mind property in land. But the failure of the attempt to 
bring this species of property under the only possible 



462 THE DISTEIBUTION OF WEALTH. Book IV. 

justification of property, the right of the producer to the 
product, is even more painfully clear when he comes, as 
he does in Chapter II., Sec. 3, specifically to treat of it. 

He begins this by another admission of the truth utterly 
inconsistent with the derivation of property from expedi- 
ency; saying: 

Nothing is implied in property but the right of each to his (or her) 
own faculties. 

And then after some long disquisitions on bequest and 
inheritance which I will not comment on here lest it might 
divert the reader from the main subject, he continues 
again : 

The essential principle of property being to assure to all persons 
what they have produced by their labor and accumulated by their 
abstinence, this principle cannot apply to what is not the produce of 
labor, the raw material of the earth. 

Abstinence is not a doing but a not doing, a refraining 
from consuming. The essential principle of property 
being to assure to all persons what they have produced by 
their labor, this of course includes what having been pro- 
duced by labor is afterwards accumulated by abstinence. 
These words '' and accumulated by their abstinence " are 
superfluous, having no weight or place in the argument, 
but their introduction is significant of the disposition to 
assmne that capital rather than labor is the active factor 
in production. 

But though a little superfluous in phrase, this statement 
is true and clear. In the conflict going on in Mill's mind 
the perception of a basis of property in natural law seems, 
in the admission that the principle of property cannot apply 
to land, to have finally conquered both the notion that its 
basis is in human law and the pre- assumption from which 
the notion comes. 



Chap.ri. CAUSE OF CONFUSION AS TO PROPERTY. 463 

But this is hardly for a moment. In the next sentence, 
not paragraph, and on the very same line in the printed 
page, the pre-assumption that has confused him asserts its 
power and MiU proceeds to argue that the principle of 
property does apply to land. He does this by what is in 
reahty, though doubtless unconsciously to him, a juggle 
with words. But as his argument is the stock argument 
of the scholastic economists, I will quote it in full, distin- 
guishing by italics the sentence already given : 

Tlie essential principle of property heing to assure to all persons ivhat 
they have produced hy their labor and accunmlated iy their abstinence, 
this jmnciple cannot apply to ivhat is not the produce of labor, the raio 
material of the earth. If the land derived its productive power wholly 
from nature, and not at all from industry, or if there were any means 
of discriminating what is derived from each source, it not only would 
not be necessary, but it would be the height of injustice, to let the 
gift of nature be engrossed by individuals. The use of the land in 
agriculture must indeed, for the time being, be of necessity exclusive ; 
the same person who has plowed and sown miist be permitted to 
reap ; but the land might be occupied for one season only, as among 
the ancient Germans ; or might be periodically redivided as popula- 
tion increased : or the State might be the universal landlord, and the 
cultivators tenants under it, either on lease or at will. 

But though land is not the produce of industry, most of its valu- 
able qualities are so. Labor is not only requisite for using, but 
almost equally so for fashioning, the instrument. Considerable labor 
is often required at the commencement, to clear the land for cultiva- 
tion. In many cases, even when cleared, its productiveness is wholly 
the effect of labor and art. The Bedford Level produced little or 
nothing until artificially di-ained. The bogs of Ireland, until the 
same thing is done to them, can produce little besides fuel. One of 
the barrenest soils in the world, composed of the material of the 
Goodwin Sands, the Pays de Waes in Flanders, has been so fertilized 
by industry, as to have become one of the most productive in Europe. 
Cultivation also requires buildings and fences, which are whoUj^ the 
produce of labor. The fruits of this industry cannot be reaped in a 
short period. The labor and outlay are immediate, the benefit is 
spread over many years, perhaps over all future time. A holder will 
not incur this labor and outlay when strangers and not himself will 



464 THE DISTRIBUTION OF WEALTH. Book IV. 

be benefited by it. If he undertakes such improvements, he must 
have a sufficient period before him in which to profit by them ; and 
he is in no way so sure of having always a sufficient period as when 
his tenure is perpetual. 

These are the reasons which form the justification in an economi- 
cal point of view, of property in land. 

This argument begins by asserting that the principle of 
property cannot apply to land ; it ends by asserting that it 
does. The language is loose, for Mill indulges in a practice 
dangerous where exactness is important, the use of para- 
phrases for economic terms, such as ''raw material of the 
earth" and "gift of nature" for land; "industry" for 
labor, and "valuable qualities"* for useful qualities, or 
productive powers. But carefully to consider these rea- 
sons which are held to justify the unjustifiable, is to see 
that their plausibility is brought about by the same way 
that a juggler seems to change a watch into a turnip — the 
substitution of one thing for another thing while attention 
is distracted. In this case the substitution is of one sense 
of a word for another different sense of the same word. 

The word land, as before explained, has two senses. 
One of these is that of the dry and solid superficies of the 
globe as distinguished from water or air, or that of the 
cultivatable matter of the ea,rth as distinguished from 
rock or sand or ice or bog. In this sense we frequently 
speak of "improved land" or "made land." The other, 
the economic sense of the word, is that of the natural or 
passive element in production, including the whole exter- 
nal world, with all its powers, qualities and products, as 
distinguished from the human or active element, labor, 
and its sub-element, capital. In this sense we cannot 

* Value in political economy should be restricted to value in 
exchange, and the only sense in which land or other natural objects 
or their qualities may be said to have ^'alue in themselves is that of 
value in use. (See Book II., Chapter X.) 



Chajp.ri. CAUSE OF CONFUSION AS TO PROPEETY. 465 

speak of '' improved land "or " made land." Such phrases 
would involve contradiction in terms. 

Now in the reasoning just quoted Mill slips from one to 
the other of these two senses of the word land, not merely 
in the same connection, but in the same sentence, and 
even as between the noun and its pronoun without notice 
to the reader and seemingly without consciousness on his 
own part. 

The first suggestion of this substitution comes in the 
ifs of the second sentence. If, says Mill, land derived its 
productive power wholly from nature and not at all from 
labor, or if there were any means of discriminating what 
is derived from each source, it would be the height of 
injustice to let land be engrossed by individuals. 

Why these ifs f Mill is here writing as a political 
economist, in a work entitled "Principles of Political 
Economy," and for the purpose in this particular place of 
discovering whether there is any justification from an 
economic point of view of property in land. Land, as a 
term of pohtical economy, means that element of productive 
power derived from nature and not at all from labor. It 
hag and can have no other meaning. The first principle 
of political economy is the distinction between the produc- 
tive power derived wholly from nature, for which its term 
is land, and the productive power derived from human 
exertion, for which its term is labor. Where the reason 
can find no "means of discriminating what is derived 
from each source," political economy becomes impossible, 
and to confuse this discrimination is to abandon political 
eco-nomy. 

This is precisely what Mill does, when he goes on in the 
first sentence of the next paragraph to tell us that " though 
land is not the produce of industry, most of its valuable 
qualities are so." He is abandoning political economy 
by dropping in the pronoun the sense in which he uses 



466 THE DISTRIBUTION OF WEALTH. Book IV. 

the word land in the noun, and fallmg with seeming 
unconsciousness -into the vague sense of common speech. 
When he says that land is not the produce of industry he 
uses the word in the economic sense. But when he says 
that qualities of land are the produce of labor he is using 
the word in that loose ordinary sense in which we speak 
of "improved land" or ''made land." For what single 
quality of land in the economic sense of the word is the 
produce of labor? Is it gravitation! Is it extension? 
Is it cohesion? Is it chemical affinities or repulsions? 
Is it the qualities shown in generation and germination 
and growth ? Why, MiU himself in the first chapter of the 
first book of his " Principles of Political Economy " declares 
that the primary power of labor, that by which man can 
alone act on the external world, consists In that power of 
muscular contraction by means of which he can to some 
slight extent move or arrest the motion of matter, adding : 

Labor, then, in the physical world, is always and solely employed in 
putting objects in motion; the properties of matter, the laws of 
nature, do all the rest. 

These properties of matter, these laws of nature which 
when labor changes things in place do all the rest, are 
qualities of land in the economic sense of the word land. 
MiU does not mean that they are ever the produce of 
industry? He cannot mean that. The fact is, that 
abandoning the economic sense of the word land, he resorts 
to that loose colloquial sense of the word in which we 
speak of " improving land" or " making land." And it is 
with illustrations of ''improved land" and "made land" 
that he goes on to show how the quahties of land are 
products of labor. 

Let me too do a little iUastrating, for the confusions to 
which Mill succumbed are in these closing years of the 



Chap.ri. CAUSE OF CONFUSION AS TO PROPERTY. 467 

century being crammed into the minds of young people 
by a thousand '' professors of political economy : " 

I am writing these pages on the shore of Long Island, 
where the Bay of New York contracts to what is called 
the Narrows, nearly opposite the point where our legalized 
robbers, the Custom-House officers, board incoming 
steamers to ask strangers to take their first American 
swear, and where if false oaths really colored the atmo- 
sphere the air would be bluer than is the sky on this 
gracious day. I turn from my writing-machine to the 
window, and drink in, with a pleasure that never seems to 
pall, the glorious panorama. 

'' What do 3'ou see ? " If in ordinary talk I were asked 
this, I should of course say, ''I see land and water and 
sky, ships and houses and light clouds, and the sun, 
drawing to its setting, over the low green hills of Staten 
Island, and illuminating all." 

But if the question refer to the terms of political economy, 
I should say, " I see land and wealth." Land, which is the 
natural factor of production; and wealth, which is the 
natural factor so changed by the exertion of the human 
factor, labor, as to fit it for the satisfaction of human de- 
sires. For water and clouds, sky and sun, and the stars that 
wiU appear when the sun is sunk, are, in the terminology 
of political economy, as much land as is the dry surface of 
the earth to which we narrow the meaning of the word in 
ordinary talk. And the window through which I look; 
the flowers in the garden ; the planted trees of the orchard ; 
the cow that is browsing beneath them ; the Shore Road 
under the window ; the vessels that lie at anchor near the 
bank, and the little pier that juts out from it ; the trans- 
Atlantic liner steaming through the channel ; the crowded 
pleasure-steamers passing by ; the puffing tug with its line 
of mud-scows ; the fort and dwellings on the opposite side 



468 THE DISTRIBUTION OF WEALTH. Boole IV. 

of the Narrows; the lighthouse that will soon begin to 
cast its far-gleaming eye from Sandy Hook; the big 
wooden elephant of Coney Island ; and the graceful sweep 
of the Brooklyn Bridge, that may be discovered from a 
little higher up; all ahke fall into the economic term 
wealth— land modified by labor so as to afford satisfaction 
to human desires. All in this panorama that was before 
man came here, and would remain were he to go, belongs 
to the economic category land; while all that has been 
produced by labor belongs to the economic category wealth, 
so long as it retains its quality of ministering to human 
desire. 

But on the hither shore, in view from the window, is a 
little rectangular piece of dry surface,.evidently reclaimed 
from the line of water by filling in mth rocks and earth. 
What is that? In ordinary speech it is land, as distin- 
guished from water, and I should intelligibly indicate its 
origin by speaking of it as "made land." But in the 
categories of political economy there is no place for such 
a term as "made land." For the term land refers only 
and exclusively to productive powers derived wholly from 
nature and not at all from industry, and whatever is, and 
in so far as it is, derived from land by the exertion of labor, 
is wealth. This bit of dry surface raised above the level 
of the water by filling in stones and soil, is, in the economic 
category, not land, but wealth. It has land below it and 
around it, and the material of which it is composed has 
been drawn from land ; but in itself it is, in the proper 
speech of political economy, wealth ; jnst as truly as the 
ships I behold are not land but wealth, though they too 
have land below them and around them and are composed 
of materials drawn from land. 

Now here is the evident confusion in Mill's thought^ 
which he has perplexed by dropping from the terminology 
of political economy to the language of ordinary speech. 



Chap. VI. CAUSE OF CONFUSION AS TO PKOPERTY. 469 

The Bedford Level, which is land that has been drained ; 
the eultivatable bog of Ireland, which is land that has had 
a coating of soil put on it ; the improved farms he refers 
to, which are land cleared or manured by labor, belong all 
of them to the same economic category as the httle piece 
of " made land " visible from my window. In the qualities 
that he is considering in them they are all of them in the 
economic meaning not land at all, but wealth; not the 
free gift of nature, but the toil-earned produce of labor. 
In this, and so far as these qualities go, but no further- 
that is, in so far as they are wealth, not land, they are 
property ; not because human agency can add any qualities 
to the natural factor, land; but because of the natural 
law of property, which gives to the producer the ownership 
of what his labor has produced. 

MiU seems to think that he has shown the justification 
of property in land, but the reasons he gives only justify 
property in the produce of labor ; thus in his own case 
adding a signal instance of the truth of what he has before 
said that " in every defense made of it, property is supposed 
to mean the guarantee to individuals of the fruits of their 
own labor." 



BOOK V. 



MONEY— THE MEDIUM OF EXCHANGE AND 
MEASURE OF VALUE 



CONTENTS OF BOOK Y. 



MONEY— THE MEDIUM OF EXCHANGE AND 
MEASURE OF VALUE. 



PAGE 

INTRODUCTION TO BOOK V 477 



CHAPTER I. 
CONFUSIONS AS TO MONEY. 

SHOWING THE DIVERGENCE IN COMMON THOUGHT AND AMONG 
ECONOMISTS AS TO MONEY. 

Present confusions as to money — Their cause — How to disen- 
tangle them 479 



CHAPTER II. 
THE COMMON UNDERSTANDING OF MONEY. 

SHOWING THAT THE COMMON USE OP MONEY IS TO BUY THINGS 
WITH, AND THAT ITS ESSENTIAL CHARACTER IS NOT IN ITS MA- 
TERIAL, BUT IN ITS USE. 

The use of money to exchange for other things — Buying and sell- 
ing — Illustration of the travelers — Money not more valuable 
than other things, but more readily exchangeable — Exchanges 
without money — Cheeks, etc., not money — Different money in 
different coimtries — But money not made by government fiat — 
Does not necessarily consist of gold and silver — Or need intrin- 
sic value — Its essential quality and definition .... 482 

473 



474 CONTENTS OF BOOK V. 

CHAPTER III. 
MEDIUM OF EXCHANGE AND MEASURE OF VALUE. 

SHOWING HOW THE COMMON MEDIUM OF EXCHANGE BECOMES THE 
COMMON MEASURE OF VALUE, AND WHY WE CANNOT FIND A COM- 
MON MEASURE IN LABOR. 

PAGE 

Money is most exchanged — Why not measure value by labor? 
— Smith's unsatisfactory answer — The true answer — Labor can 
afford no common measure, and commodities are preferably 
taken — Survivals of common measures — Difference in common 
measures does not prevent exchange 495 

CHAPTER IV. 
THE OFFICE OF CREDIT IN EXCHANGES. 

SHOWING THAT THE ADVANCE OF CIVILIZATION ECONOMIZES 
THE USE OF MONEY. 

Tendency to over-estimate the importance of money — Credit 
existed before the use of money began — And it is now and 
always has been the most important instrument of exchange — 
Illustration of shipwrecked men — Adam Smith's error as to 
barter — Money's most important use to-day is as a measure of 
value 504 

CHAPTER V. 
THE GENESIS OF MONEY. 

SHOWING THAT THE LAW OF GRATIFYING DESIRES WITH THE 
LEAST EXERTION PROMPTS THE USE FROM TIME TO TIME OF 
THE MOST LABOR-SAVING MEDIUM AVAILABLE. 

Money not an invention, but developed by civilization — It grows 
with the growth of exchanges — Exchange first of general com- 
modities — Then of the more convenient commodities — Then 
of coin, whose commodity value comes to be forgotten — Illus- 
tration of the American trade dollar — The lessening uses of 
commodity money and extensions of credit money — Two ele- 
ments in exchange value of metal coin : intrinsic, or value of 
the metal itself ; and seigniorage — Meaning of seigniorage — 
Exchange value of paper money is seigniorage — Use of money 
is not for consumption, but exchange — Proprietary articles as 
mediums of exchange — Mutilated coins — When lessening metal 
value in coins does not lessen circulating value — The essential 



CONTENTS OF BOOK V. 475 

PAGE 

being that both represent the same exertion — This the reason 
why paper money exchanges equally with metal money of like 
denomination 512 



CHAPTER VI. 
THE TWO KINDS OF MONEY. 

SHOWING THAT ONE ORIGINATES IN VALUE FROM PRODUC- 
TION AND THE OTHER IN VALUE FROM OBLIGATION. 

Money peculiarly the representative of value — Two kinds of 
money in the more highly civilized world — Commodity money 
and value from production — Credit money and value from obli- 
gation — Of credit money — Of commodity money — Of intrinsic 
value — Gold coin the only intrinsic value money now in cir- 
culation in the United States, England, France or Germany 526 



INTRODUCTION TO BOOK V. 

THIS Book is really in the nature of a supplement to 
Book II., " The Nature of Wealth." In my first draft 
of arrangement, a matter of much perplexity, the discussion 
of money was to have followed the discussion of value, 
with which it is so intimately connected ; or at least, to have 
followed the discussion as to the definition of wealth. But 
to have given to the subject of money in Book II. the 
thorough treatment which present confusions seem to 
require would not only have disproportionately expanded 
that Book, but would have made needful the anticipation 
of some of the conclusions more logically and conveniently 
reached in Book III. and Book IV. I therefore finally 
determined as the best arrangement for the reader of this 
work to answer briefly in the last chapter of Book II. the 
question as to the relation of money to wealth which the 
conclusion of the discussion of the nature of wealth would 
be certain to bring, and to defer a fuller discussion of the 
subject of money until after the production and distribution 
of wealth had both been treated. This point has now been 
reached, and continuing as it were Chapter XXI. of 
Book II., ''The Nature of Wealth," I proceed to the 
discussion of the medium of exchange and measm-e of 
value. 



CHAPTER I. 

CONFUSIONS AS TO MONEY. 

SHOWING THE DIVERGENCE EST COMMON THOUGHT AND AMONG 
ECONOMISTS AS TO MONEY. 

Present confusions as to money— Their cause— How to disentangle 

them. 

THERE is no social idea or instrument with which 
civihzed men are more generally and personally- 
familiar than money. From early infancy to latest age 
we all use it in thought and speech and daily trans- 
actions, without practical difficulty in distinguishing what 
is money from what is not money. Yet as to what it 
really is and what it really does, there are both in common 
thought on economic subjects and in the writings of 
professed economists the widest divergences. This is 
particularly obvious in the United States at the time I 
wi'ite. For twenty years the money question has been 
under wide discussion, and before that, has had similar 
periods of wide discussion from the very foundation of 
the American colonies, to say nothing of the discussion 
that has gone on in Europe. Yet the attitude of Congress, 
of the State legislatures, of the political parties, and the 
press, shows that nothing hke any clear conclusion as to 
first principles has yet been arrived at. As for the vast 
literature of the subject which has been put into print 
within recent years any attempt to extract from it a 
consensus of opinion as to the oflice and laws of money is 

479 



480 OF MONEY. Book F. 

likely to result in the feeling expressed by an intelligent 
man who recently made this attempt, that " The more one 
reads the more he feels that any sure knowledge on the 
question is beyond his comprehension." 

The very latest American cyclopedia (Johnson's, 1896) 
gives this definition: ''Money is that kind of currency 
which has an intrinsic value, and which thus if not used 
as currency would still be wealth." Thus, there are some 
who say that money really consists of the precious metals, 
and that whatever may be locally or temporarily or par- 
tially used as money can be so used only as a represen- 
tative of these metals. They hold that the paper money 
which now constitutes so large a part of the currency of 
the civilized world derives its value from the promise, 
expressed or implied, to redeem it in one or another of 
these metals, and by way of assuring such redemption vast 
quantities of these precious metals are kept idly in store 
by governments and banks. 

Of those who take this view, some hold that gold is the 
only true and natural money, in- the present stage of 
civilization at least; while others hold that silver is as 
much or even more entitled to that place, and that the 
gravest evils result from its demonetization. 

On the other hand there are those who say that what 
makes a thing money is the edict or fiat of government 
that it shall be treated and received as money. 

And again, there are others still who contend that 
whatever can be used in exchange to the avoidance of 
barter is money, thus including in the meaning of the 
term, notes, checks, drafts, etc., issued by private parties, as 
fully as the coins or notes issued by governments or banks. 

Much of the contradiction and confusion which exists 
in popular thought proceeds from the pressure of personal 
interests brought into the question by the relation of debtor 
and creditor. But the confusions which prevail among 
professed economists have a deeper source. They evidently 



CJiajh L CONFUSIONS AS TO MONEY. 481 

result from the confusions which prevail in economic 
thought and teaching as to the nature of wealth and the 
cause of value. Money is the common measure of value, 
the common representative and exchanger of wealth. 
Unless we have clear ideas of the meaning of value and the 
nature of wealth, it is manifest therefore that we cannot 
form clear ideas as to the nature and functions of money. 
But since we have cleared up in the preceding chapters the 
meaning of the terms value and wealth, we are now in 
a position to proceed with an inquiry into the nature, 
functions and laws of money. It is unnecessary to waste 
time with any attempt to disentangle the maze of contra- 
dictory statements of fact and confusions of opinion with 
which the current literature of the subject is embarrassed. 
The true course of all economic investigation is to observe 
and trace the relation of those social phenomena that are 
obvious now and to us. For economic laws must be as 
invariable as physical laws, and as the chemist or astronomer 
can safely proceed only from relations which he sees do here 
and now exist to infer what has existed or wiU exist in an- 
other time and place, so it is with the political economist. 

Yet we find, if we consider them, that these divergences 
in the definition of money spring rather from differences 
of opinion as to what ought to be considered and treated 
as money, than from differences as to what, as a matter 
of fact, money actually is. The men who differ most 
widely in defining money find no difficulty in agreeing as 
to what is meant by money in daily transactions. Since 
we cannot find a consensus of opinion among economists, 
our best plan is to seek it among ordinary people. To 
see what usually is meant by money we have only to note 
the essential characteristics of that which we all agree in 
treating as money in our practical affairs. 

After we have seen what money really is, and what are 
the functions it performs, we shall then be in a position to 
determine what are the best forms of money. 



CHAPTER II. 
THE COMMON UNDERSTANDING OF MONEY. 

SHOWING THAT THE COMMON USE OF MONEY IS TO BUY 
THINGS WITH, AND THAT ITS ESSENTIAL CHARACTER IS 
NOT IN ITS MATERIAL BUT IN ITS USE. 

The use of money to exchange for other things— Buying and selling 
—Illustration of the travelers— Money not more valuable than 
other things, but more readily exchangeable— Exchanges without 
money— Checks, etc., not money— Different money in different 
countries — But money not made by government fiat — Does not 
necessarily consist of gold and silver— Or need intrinsic value- 
Its essential quality and definition. 

WHEN we are confused as to tlie true meaning of an 
economic term, our best plan is to endeavor to 
obtain a consensus of opinion as to what the thing really 
is ; what function it really performs. 

If I have agreed to pay money to another the common 
understanding of what money is wiU not hold my agree- 
ment fulfilled if I offer him wood, or bricks, or services, or 
gold or silver bullion, even though, as closely as can be 
estimated, these may be of equal value to the money 
promised. My creditor might take such things in lieu of 
what I had agreed to pay. But he would be more likely 
to object, and his objection if fully expressed would 
amount to this : " What you agreed to pay me was 
money. With money I can buy anything that any one 
has to sell, and pay any debt I owe. But what you offer 

482 



Chap. 11. COMMON UNDERSTANDING OF MONEY. 483 

me is not money. It is something I would be willing to 
take if I happened to have any personal use for it. But 
I have no personal use for it, and to get any one to give 
me for it what I may want I must find some one who wants 
this particular thing and make a trade with him. What 
you propose would therefore put on me trouble, risk and 
loss not contemplated in our agreement." And the justice 
of this objection would be recognized by all fair men. 

In this— in the ease with which it may be passed from 
hand to hand in canceling obligations or transferring 
ownership— lies the peculiar characteristic of money. It 
is not the intrinsic nature of the thing, but the use to 
which it is appKed that gives its essential character to 
money, and constitutes the distinction between it and 
other things. Even children recognize this. I make 
friends with a little one of four or five, and, showing it a 
stick of candy, ask what that is for ? it will say, '^ That 
is to eat." If I show a hat or a pair of shoes, it wiU. say, 
" That is to wear." If I show a toy, it will say, '^ That is 
to play with." But if I show a piece of money, it will say, 
even though to it as yet all money may be pennies, " That 
is to buy things with." 

Now, in this, the little child wiU give a definition of 
money that, whatever may be our monetary theories, we 
aU practically recognize. The peculiar use of money— 
what as money '4t is for"— is that of buying other things. 
What by virtue of this use is money, may or may not have 
capability for any other use. That is not material. For 
so long as a thing is reserved to the use of buying things 
any use inconsistent with this use is excluded. 

We might, for instance, apply sticks of candy to the use 
of buying things. But the moment a stick of candy was 
appUed to the use of being eaten its use in bujdng things 
would end. So, if a greenback be used to light a cigar, 
or a gold coin converted to the use of fiUing teeth, or of 



484 OF MONEY. Book V. 

being beaten into gold-leaf, its use as money is destroyed. 
Even where coins are used as ornaments, their use as 
money is during that time prevented. 

In short, the use of money, no matter of what it be 
composed, is not directly to satisfy desire, but indirectly 
to satisfy desire through exchange for other things. We do 
not eat money nor drink mone}^ nor wear money. We pass 
it. That is to say, we buy other things with it. We esteem 
money and seek it, not for itself, but for what we may 
obtain by parting with it, and for the purpose of thus 
parting with it. This is true even where money is hoarded, 
for the gratification which hoarding gives is the conscious- 
ness of holding at command that with which we may 
readily buy anything we may wish to have. 

The little child I have supposed would probably not 
know the meaning of the word exchange, which is that of 
the voluntary transfer of desired things for desired things. 
But it would know the thing, having become familiar with 
it in the little exchanges that go on between children— in 
the giving of marbles for tops, of candy for toys, or in 
transactions based on '' I will do this for you, if you will 
do that for me." But such exchanges it would probably 
speak of as trades or swaps or promises, reserving the 
words buying or selling to exchanges in which money is 
used. 

In this use of words the child would conform to a 
practice that has become common among careful writers. 
In the wider sense, buying and selling merely distinguish 
between the giver and receiver in exchange ; and it is in 
this wider sense that Adam Smith uses the words, and as 
in poetry or poetical expression we continue to use them. 
But both in ordinary usage and in political economy we 
now more generally confine the words buying and selling 
to exchanges in which money is given or promised, speaking 
of an exchange in which money is not involved, as a barter 



Clia^. II. COMMON UNDERSTANDING OF MONEY. 485 

or trade, or simply an exchange. It is where money is 
one of the things exchanged that the transaction is called 
a purchase and sale ; the party who gives money for an- 
other thing being termed the buyer, and the party who gives 
tlie other thing for the money being termed the seller. 

In this usage, we habitually treat money as though it 
were the more notable or more important side of exchanges 
in which things not money are given for money— that side 
of exchange from which or towards which the initiative 
impulse proceeds. And there is another usage which 
points in the same direction. Among the masses of oui* 
people at least, and I presume the same usage obtains in 
all countries, good manners is held to require that where 
money passes in a transaction of exchange, the receiver of 
the money should by some such phrase as ''Thank you," 
indicate a sense of benefit or obligation. 

The reason of both these usages is, I think, to be found 
in the fact that money is the thing in which gain or profit 
is usually estimated ; the thing which can usually be most 
readily and certainly exchanged for any other thing. 
Thus whatever difficulty there may be in exchanging 
particular commodities or services for other commodities 
or services is generally most felt in exchanging them for 
money. That exchange once made, any subsequent 
exchange of the money for the things that are the ultimate 
objects of desire is comparatively easy. It is this that 
makes it seem to those who do not look closely, that what 
is sought in exchange is money, and that he who gets 
money in return for other things, is in a better position 
than he who gets other things in return for money. 

To see in what money reaUy differs from other things 
having exchangeable or purchasing power let us imagine 
a number of men to undertake a journey through a 
country where they have no personal acquaintance. Let 
them for instance start from New York, in pleasant 



486 OF MONEY. Book V. 

weather, to make a leisurely trip by tlie highroads for 
one to two hundred miles. Let them for the defrayal of 
the expenses of the journey provide themselves with 
exchangeable things of different kinds. Imagine one to 
have a valuable horse; another some staple commodity, 
such as tobacco or tea ; another gold and silver bullion ; 
anotlier a check or bill of exchange, or a check-book ; and 
a fifth to have cuiTent money. These things might have 
value to the same amount, but at the fii'st stop for rest 
and refreshment the great difference between them as to 
readiness of convertibility would be seen. 

The only way the man with the horse could pay for the 
slightest entertainment for man or beast, without selling 
his horse for money, or bartering for things that might 
be very inconvenient to carry, would be by trading him 
for a less valuable horse. It is clear that he could not go 
far in this way, for, to say nothing of the delays incident 
to horse trades, he would, if he persisted in them under 
pressure of his desire to go on, soon find himself reduced 
to an animal that could hardly carry himself. 

Though of aU staple commodities, tobacco and tea are 
probably those most readily divisible and easily carried, 
the tourist who tried to pay his way with them would find 
much difficulty. If not driven to seU his stock outright 
for what money he could get, he would virtually have to 
convert his pleasure excursion into a peddling trip ; and, 
to say nothing of the danger he would run of being 
arrested for infringement of Federal or local license laws, 
would be put to much delay, loss and annoyance in finding 
those willing to give the particular things he needed for 
the particular things he had. 

And while gold and silver are of aU commodities those 
which have the most uniform and staple value, yet the 
man who had started with bullion would, after he had 
left the city, hardly find any one who could tell their real 



CJia^. 11. COMMON UNDEESTANDING OF MONEY. 487 

value or was willing to take them in return for commod- 
ities or ser^dce. To exchange them at all at anything like 
a reasonable rate he would have to hunt up some village 
jeweler who could test and weigh them, and who, though 
he might offer to give him a clock or a trinket, or to repair 
his watch in exchange, would hardly have the commodities 
or service our traveler needed at his disposal. To get 
what he wanted for what he had to give without recourse 
to money he would be driven to all sorts of intermediate 
exchanges. 

As for the man with the check-book, or check or bill of 
exchange, he would find himself the worst off of all. He 
could make no more use of them where he was not known 
than of so much blank paper, unless he found some one 
who could testify to his good credit or who would go to 
the expense of telegraphing to learn it. To repeat this at 
every stopping-place, as would be necessary if his trip were 
to be carried through as it had been begun, would be too 
much for the patience and endurance of an ordinary man. 

But the man with the money would find no difficulty 
from first to last. Every one who had any commodity to 
exchange or service to render would take his money gladly 
and probably say " Thank you" on receiving it. He alone 
could make the journey he set out to make, without delay 
or annoyance or loss on the score of exchanges. 

What we may conclude from this little imaginative 
experiment is not that of all things money is the most 
valuable thing. That, though many people have in a 
vague way accepted it, would involve a fallacy of the 
same kind that is involved in the assumption that a 
pound of lead is heavier than a pound of feathers. What 
we may safely conclude from our experiment is, that 
of all exchangeable things money is the most readily ex- 
changeable, and indeed that this ready exchangeability 
is the essential characteristic of money. 



488 OF MONEY. Boole V. 

Yet we have but to extend our illustration so as to 
imagine our travelers taking with them beyond this country 
that same money they had found so easily exchangeable 
here^ to see that money is not one substance, nor in all 
times and places the same substance. 

What is money in the United States is not money in 
England. What is money in England is not money on the 
Continent. What is money in one of the Continental 
states may not be money in another, and so on. Although 
in places in each country much resorted to by travelers 
from another country, the money of the two countries 
may circulate together, as American money with English 
money in Bermuda; or Canadian money with American 
money at Niagara Falls ; or Indian money, English money, 
French money and Egyptian money at Port Said ; yet the 
traveler who wishes to pass beyond such monetary borders 
with what will readily exchange for the things he may 
need must provide himself with the money of the country. 
The money that has served him in the country he has left 
becomes in a country using a different money a mere 
commodity the moment he leaves the monetary border, 
which he will find it advantageous to exchange with some 
dealer in such commodities for money of the country. 

Is money therefore a matter of mere governmental 
regulation ? That is to say, can governmental statute or 
fiat, as is to-day contended by many, prescribe what money 
shall be used and at what rate it shall pass ? 

It is unnecessary for those of us who lived in or visited 
California between the years 1862 and 1879, to look further 
than our own country and time to see that it cannot. 
During those years, while the money of the rest of the 
Union was a more or less depreciated paper, the money of 
that State, and of the Pacific coast generally, was gold and 
silver. The paper money of the general government was 
used for the purchase of postage stamps, the payment of 



Chap. 11. COMMON UNDERSTANDING OF MONEY. 489 

internal revenue dues, the satisfaction of judgments of the 
Federal courts, and of those of the State courts where 
there was no specific contract, and for remittances to the 
East. But between man and man, and in ordinary trans- 
actions, it passed only as a commodity. 

If it be said that governmental power was not fidly 
exerted in this case ; that the United States government 
dishonored its own currency in making bonds payable and 
Custom-House dues receivable only in gold, and that the 
California specific contract law virtually gave the recog- 
nition of the State courts only to gold and silver, we may 
turn to such examples as that of the Confederate currency ; 
as that of the Continental currency ; as that afforded by 
Colonial currencies prior to the Revolution ; as that of the 
French assignats ; or to that comical episode in which the 
caustic pen of Dean Swift, writing under an assumed name, 
balked the whole power of the British government in its 
effort to induce the Irish people to accept what was really 
a better copper money than that they were using. 

Government may largely affect the use of money, as it 
may largely affect the use of language. It may enact 
what money shall be paid out and received by government 
officials, or recognized in the courts, as it may prescribe 
in what language government documents shall be printed 
or legislative or legal proceedings held, or scholars in the 
public schools be taught. But it can no more prescribe 
what shall be used as the common medium of exchange 
between man and man in transactions that depend on 
mutual consent than it can prescribe in what tongue 
mothers shall teach their babes to lisp. In all the many 
efforts that governments, limited or absolute, have made 
to do this, the power of government has signally failed. 

Shall we say then, as do many who point out this 
impotency of mere government fiat, that the exchange 
value of any money depends ultimately upon its intrinsic 



490 OF MONEY. Boole V. 

value ; that the real money in the world, the only true and 
natural money, is gold and silver, one or both — for the 
metal-moneyists differ as to this, being divided into two 
opposing camps — the monometallists and the bimetallists f 

This notion is even more widely opposed to facts than 
is that of the fiatists. Grold and sUver have for the longest 
time and over the widest area served, and yet do sierve, 
as material for money, and sometimes have served, and in 
some places yet do serve, as money. This was the ease, 
to some extent, in the early days of the California diggings, 
when every merchant or hotel-keeper or gambler or bar- 
tender was provided with a bottle of acid and a pair of 
scales, and men paid for goods or food or lodging or 
drinks or losses out of buckskin bags in which they carried 
gold dust or nuggets. This is to some extent still the case 
in some parts of Asia, where, as was once the case in parts 
of Europe, even gold and silver coin passes by weight. 
But gold and silver are not the money of the world. The 
traveler who should attempt to go round the world paying 
his expenses with gold and silver bullion would meet the 
same difficulty or something like the same difficulty that 
he would meet in the country around New York. Nor 
would he obviate that difficulty by taking instead of 
bullion, gold and silver coin. Except in a few places, such 
as Bermuda or the Hawaiian Islands, they too would 
become commodities not easily exchangeable when he left 
the United States. 

The truth is that there is no universal money and never 
yet has been, any more than there is or has been in times 
of which we have knowledge a universal language. 

As for intrinsic value, it is clear that our paper money, 
which has no intrinsic value, performs every office of 
money— is in every sense as truly money as our coins, 
which have intrinsic value ; and that even of our coins, 
their circulating or money value has for the most part no 



Chap. II. COMMON UNDEESTANDING OF MONEY. 491 

more relation to intrinsic value than it has in the case of 
our paper money. And this is the case to-day all over the 
civilized world. 

The fact is that neither the fiat of government nor the 
action of individuals nor the character or intrinsic value 
of the material "used, nor anything else, can make money 
or mar money, raise or lessen its circulating value, except 
as it affects the disposition to receive it as a medium of 
exchange. 

In different times and places all sorts of things capable 
of more or less easy transfer have been used as money. 
Thus in San Francisco in the early days, when the sudden 
outflow of gold from the mines brought a sudden demand 
for money which there was no ready means of supplying 
bogus coins, known to be bogus, passed from hand to 
hand as money ; and in New York at the beginning of the 
Civil War, when there was a great scarcity of circulating 
medium, owing to the withdrawal of gold and silver from 
circulation, postage stamps, car tickets, bread tickets, and 
even counterfeit notes, known to be counterfeit, passed 
from hand to hand as money. 

Shall we say then that they are right who contend that 
a true definition of money must include everything that 
can be used in exchange to the avoidance of barter ? 

Clearly, we cannot say this, without ignoring a real and 
veryimportant distinction— the distinction between money 
and credit. For a little consideration will show that the 
checks, drafts, negotiable notes and other transferable 
orders and obligations which so largely economize the use 
of money in the commercial world to-day, do so only when 
accompanied by something else, which money itseK does 
not require. That something else is trust or credit. This 
is the essential element of all devices and instruments for 
dispensing with the medium ship of money without resort 
to barter. It is only by virtue of it that they can take 



492 OF MONEY. Booh V. 

the place of the money which in form they are promises 
to pa5^ 

When I give money for what I have bought, I pay my 
debt. The transaction is complete. But I do not pay my 
debt when I give a check for the amount. The transaction 
is not complete. I merely give an order on some one else 
to pay in my place. If he does not, I am still responsible 
in morals and in law. As a matter of fact no one will 
take a check of mine unless he trusts or credits me. And 
though an honest face, good clothes and a manifest ex- 
igency might enable me to pass a small check upon one 
who did not know me, without the guarantee of some one 
he did know, I could as readily, and perhaps more readily, 
get him to trust me outright. So, I cannot, except to one 
who knows me or to whom I am identified as a man of 
good credit, pass the check of another or his note or draft 
or bill of exchange in my favor, and without guaranteeing 
it by indorsement. Even then I do not make a payment ; 
I merely turn over with my own guarantee an order for 
payment. 

Thus there is a quality attaching to money, in common 
apprehension, which clearly distinguishes it from all forms 
of credit. It is, so far as the giver of the money is con- 
cerned, a final closing of the transaction. The man who 
gives a check or bill of exchange must guarantee its 
payment, and is liable if it be not paid ; while the drawer 
on the other hand retains the power at any time of stopping 
payment before that has been actually made. Even the 
man who gives a horse or other commodity in exchange 
must, save as to certain things and with the observance of 
certain requirements, guarantee title, and that it shall 
possess certain qualities expressed or implied. But in the 
passing of money the transaction is closed and finished, 
and there can be no further question or recourse. For 



Chap. II. COMMON UNDEKSTANDING OF MONEY. 493 

money is properly recognized by municipal law as the 
common medium of exchange. 

All such things as checks, drafts, notes, etc., though they 
largely dispense with and greatly economize the use of 
money, do so by utilizing credit. Credit as a facilitator 
of exchange is older than money and perhaps is even now 
more important than money, though it may be made into 
money, as gold may be made into money. But though it 
may be made into money, it is not in itself money, any 
more than gold of itself is money, and cannot, without 
confusion as to the nature and functions of money, be 
included as money. 

What then shall we say that money is ? 

Evidently the essential quality of money is not in its 
form or substance, but in its use. 

Its use being not that of being consumed, but of being 
continually exchanged, it participates in and facilitates 
other exchanges as a medium or flux, serving upon a larger 
scale the same purpose of keeping tally and facilitating 
transfers as is served by the chips or counters often used 
in games of chance.* 

This use comes from a common or usual consent or 
disposition to take it in exchange, not as representing 
or promising anything else, but as completing the 
exchange. 

* It is most important that this purely representative character 
of money should be thoroughly understood and constantly kept in 
mind, for from the confusion resulting from the confounding of 
money with wealth have flown the largest and most pernicious results. 
It was the basis of that anti-social theory of international exchanges 
which has cost European civilization such waste of labor and drain 
of blood, formerly known as the mercantile system and which sui-- 
vives in the protectionism of to-day. And it is at the bottom of 
those theories prevalent in the United States to-day which seek to 
increase wealth by increasing money. 



494 OF MONEY. Book V. 

The only question any one asks himself in taking money 
in exchange is whether he can, in the same way, pass it on 
in exchange. If there is no doubt of that, he will take it ; 
for the only use he has for money is to pass it on in 
exchange. If he has doubt of that, he will take it only at 
a discount proportioned to the doubt, or not take it at aU. 

What then makes anything money is the common con- 
sent or disposition to accept it as the common medium 
of exchange. If a thing has this essential quality in any 
place and time, it is money in that place and time, no 
matter what other quality it may lack. If a thing lacks 
this essential quality in any place and time, it is not 
money in that place and time, no matter what other qual- 
ity it may have. 

To define money : 

Whatever in any time and place is used as the common 
medium of exchange is money in that time and place. 

There is no universal money. While the use of money 
is almost as universal as the use of languages, and it 
everywhere follows general laws as does the use of lan- 
guages, yet as we find language differing in time and 
place, so do we find money differing. In fact, as we shall 
see, money is in one of its functions a kind of language 
—the language of value. 



CHAPTER III. 

MEDIUM OF EXCHANGE AND MEASURE 
OF VALUE. 

SHOWING HOW THE COMMON MEDIUM OF EXCHANGE BECOMES 
THE COMMON MEASURE OF VALUE, AND WHY WE CANNOT 
FIND A COMMON BIEASURE IN LABOR. 

Money is most exchanged— "Why not measure value by labor?— 
Smith's unsatisfactory answer— The true answer— Labor can 
afford no common measure, and commodities are preferably taken 
—Survivals of common measures— Difference in common measures 
does not prevent exchange. 

I HAVE in the last chapter defined money as whatever 
is at any time and place used as the common medium 
of exchange. This is indeed the primary quality of money. 
But proceeding from this use as a common medium of 
exchange, money has another and closely conjoined use — 
that of serving as a common measui'e of value. 

The reason of this is that the use of money as a common 
medium of exchange, which causes it to be esteemed for 
exchange and not for consumption, makes it of all 
exchangeable things that which in civilized societies is 
often and most commonly exchanged. A given portion 
of wood or coal, for instance, may be used by the producer 
and thus not be exchanged at all ; or it may be exchanged 
once or perhaps even half a dozen times between cutting or 
mining and its reaching in the hands of the consumer the 
ultimate end for which it was produced, the combustion 

495 



496 OF MONEY. Book F. 

that supplies heat. So it is with potatoes or wheat or corn. 
The majority of horses are probably not exchanged at 
all during their working days, and it would be a much 
exchanged horse who should have six owners during his 
life. Cotton and wool and hemp and silk may pass from 
one to half a dozen exchanges before thej^ assume the form 
of cloth or rope, and in that form may pass through from 
two to half a dozen more exchanges before reaching the 
consumer. And so with lumber or iron or most of the 
forms of paper, meat or leather. Not only is the ultimate 
purpose of the exchanges of such things destructive 
consumption, but they are mainly composed of things 
which if not soon consumed will wear out or decay. 

Money, on the other hand, is not produced for the 
purpose of being consumed, but for the purpose of being 
exchanged. This, not consumption, is its use. And we 
always seek for its substance materials least subject to 
wear and decay, while it is usually carefully guarded by 
whoever for the moment may be in its possession. And 
further while an article of money may frequently pass 
through more hands in a single day than ordinary articles 
of wealth are likety to pass through during the whole period 
of their existence, the use of money in thought and speech 
as a symbol of value brings it to the constant notice of 
those who do not often tangibly use it. Thus it is that 
the value of the money which is the common medium of 
exchange in any community becomes to the people of that 
community better known than the value of anything else, 
and hence is most readily and constantly chosen to compare 
the value of other things. 

But here may arise a question, which I wish thoroughly 
to answer: If, as explained in Book II., value is in itself 
a relation to labor, why can we not find not merely a 
common measure of A'-alue, but an exact and final measure 
of value in labor itself ? 



Chap. III. FUNCTIONS OF MONEY. 497 

This is a question that perplexes a great many of the 
monetary theories that have been broached in the United 
States without finding scholastic recognition, and it is 
raised but not satisfactorily answered by Adam Smith. 

In a passage previously quoted in full* Adam Smith 
says : " But though labor be the real measure of the ex- 
cliangeable value of all commodities, it is not tliat by which 
their value is commonly estimated." And then goes on to 
explain the reason of this. 

But in the attempt to explain this fact Adam Smith falls 
into confusion through the slipperiness of his terms and 
misses the true reason. While he says in effect that the 
time of exertion will not measure the quality of exertion, 
he yet, almost in the same breath, uses time as the measure 
of exertion, saying that '' every commodity is . . . more 
frequently exchanged for and thereby compared with other 
commodities than with labor," that "it is more natural 
therefore to estimate its exchangeable value by the quantity 
of some other commodity than by that of the labor which 
it can purchase," and that " the greater part of the people 
too understand better what is meant by the quantity of a 
particular commodity than by a quantity of labor," thus 
ignoring what he had just shown, that it is the labor (in 
the sense of exertion) that their possession will save which 
determines the value of all commodities. His attempted 
explanation of the fact that the real measure of value is 
not the common measure of value, amounts to nothing 
more than that it is more usual to measure value by 
commodities than by labor. This is no explanation of the 
fact; it is merely a statement of the fact. We cannot 
explain a custom or habit by saying that it is natural or 
showing that it is usual. The very thing to be explained 
is why it seems natural and has become usual. 

* Page 231. 



498 OF MONEY. Book V. 

Yet in the light of our previous investigation the reason 
why the real measure of value cannot serve as a common 
measure of value is clear. It lies in the human constitution. 
We become conscious of exertion through the "toil and 
trouble " it involves— the feehng of effort and at length of 
irksomeness and repugnance that attends its continuance. 
Now feeling is an affection or condition of the individual 
perception or Ego, which can find objective manifestation 
only through action. Even the mother can know the 
feelings of the babe only through its actions. If she can 
tell that it is hungry or sleepy or in pain, or is satisfied 
and happy, it is only in this way. 

As we have seen, labor in the sense of exertion, is the 
true, ultimate and universal measure of value; what 
anything will bring in exchange being always based upon 
an estimate of the toil and trouble attendant upon the 
exertion which the possession of that thing wiU save. 

But this is an estimate which, though each may make it 
for himself, he cannot convey to another directly, since the 
feeling of weariness or repugnance, the dislike of "toil 
and trouble," which constituting the resistance to, is the 
measure of, exertion, can, in our normal condition at least, 
be conveyed to, or expressed by one to another only 
through the senses. 

We make such estimates continually in our own minds, 
for memory which registers the experience of the individual 
permits us to compare the exertion it has required to do 
or procure one thing with what it has required to do or 
procure another thing. But to express to another person 
my idea of the amount of exertion required to do or procure 
a particular thing there must be something that will serve 
us as a mutual measure of the resistance to exertion, that 
is to say the "toil and trouble" that exertion involves. 

Thus, to convey to one ignorant of swimming some idea 
of the exertion it requires, I must compare it with some 



Chap. III. FUNCTIONS OF MONEY. 499 

exertion with which we are both familiar, such as walking. 
Or, if a stranger wishes to know of me what exertion he 
will have to make to walk to a certain point, I will tell 
him, if I know it, the distance, and give some idea of the 
character of the road, for he will have some idea of the 
exertion required to walk a given distance on an ordinary 
road. If he be a Frenchman accustomed to meters and 
kilometers, which neither of us can translate into feet and 
miles, I will still be able to convey to him my idea by 
saying, so many minutes' or hours' walk, for all men have 
some idea of the exertion required to walk for a certain 
time. If we could find no common nomenclature of time, 
I could still give him some idea by pointing to the dial of 
my watch or to the sun, or by finding from whence he had 
come, and making him understand that the distance he 
had yet to go was longer or shorter, and the road harder 
or easier. But there must be some point of mutual 
knowledge which will furnish us with a common measure, 
for me to make myself intelligible to him at all. 

So reversely, a common experience of required exertion 
will, in the absence of a more exact measure, give some 
idea of distance or area, as 

A bowshot from her bower eaves, 
He rode between the barley sheaves, 

or, 

They gave him of the corn-land 

That was of public right, 
As much as two strong oxen 

Could plow from morn to night. 

Now while exertion is always the real measure of value, 
to which all common measures of value must refer, yet to 
get a common measure of value, which will enable us to 
express from one to another both quantity and quality 
(duration and intensity) of exertion, we must take some 



500 OF MONEY. Boole V. 

result of exertion, just as to find a common measure of 
heat, light, expansive force or gravitation we must take 
some tangible manifestation of those forms of energy. It 
is because commodities, being the results of exertion, are 
tangible manifestations of exertion that the}'- are generally 
and naturally used as common measures of value. 

Even where exertion is expressed in time, there is always 
at least an implied reference to accomplishment or results. 
Where I hire a man to work for me by the day or week 
or month in occupations which show tangible result, as in 
digging or draining, in plowing or harvesting, in felling 
trees or chopping wood, it is always with a certain idea of 
the tangible result to be achieved, or in other words, of 
the intensity as well as of the duration of the exertion. 
If I find no result, I say that no work has been done ; and 
if I find that the results are not such as should have come 
from a reasonable or customary intensity of exertion with 
a reasonable or customary knowledge or skill, I say that 
what I really agreed to pay for has not been accorded me. 
And disinterested men would support me. 

On going ashore in San Francisco, a shipmate of mine, 
who could not tell a scythe from a marlinspike, hired out 
to a farmer in haying-time for $5 a day. At his first 
stroke with the scythe he ran it so deep in the ground 
that he nearly broke it in getting it out. Though he 
indignantly denounced such antiquated tools as out of 
fashion, declaring that he was used to " the patent scythes 
that turn up at the end," he did not really feel wronged 
that the farmer would not pay him a cent, as he knew that 
the agreement for day's labor was really an agreement 
for so much mowing. 

In fact, the form of measuring exertion by time, at 
bottom, involves its measurement by result. 

This we find to be true even where there is no definite 
result. If I hire a boatman or cabman to take me to a 



Chap. III. FUNCTIONS OF MONEY. 501 

certain point, the distance, being known, affords a close 
idea of the exertion required, and it is the fairest, and to 
both parties usually the most agreeable way, that the 
stipulation shall be for that result, or as the cabmen in 
Europe say "by course?" which is a definite payment for 
a definite result. But even were I to take a boat or a cab 
without fixed idea of where I want to go, and agree to pay 
by the hour, there is an implied understanding as to the 
intensity of the exertion for which I am to pay. Either 
boatman or cabman would feel that he was not keeping 
his agreement fairly, and I would certainly feel so, were 
he, for the purpose of "putting in time/' to row or drive 
at a snail's pace. 

So strong is the disposition to take tangible results as 
the measure of exertion that even where quality is of more 
importance than quantity, as in literary work, the formal 
measurement is even in our best magazines and newspapers 
by the page or column, differences in quality, real or 
expected, being recognized partly in the readiness with 
which an article is accepted, and partly in a greater price 
per page or per column. 

In short, while exertion, including both quantity and 
intensity, is always the true and final measure of value, it 
is only through the manifestations of exertion that any 
common measure of value can be had. Thus commodities 
being tangible expressions of exertion become the readiest 
common measures of value, and have since the beginning 
of human society been so used. 

While any commodity, or for that matter any definite 
service, may be used as a common measure of value to the 
extent to which it is recognized as embodying or express- 
ing a certain amount of exertion and thus having a def- 
inite, though not necessarily a fixed value, the tendency 
is always to use for this purpose the commodity whose 
value is most generally and easily recognized. And since 



502 OF MONEY. Boole V. 

the commodity wMch. is used as the common medium of 
exchanges becomes in that use the commodity which is 
oftenest exchanged and whose value is most generally and 
easily recognized, whatever serves as the common medium 
of exchange tends in that to become the common measure 
of value, in terms of which the values of other things are 
expressed and compared. In societies which have reached 
a certain stage of civilization this is always money. Hence 
we may define money with regard to its functions as that 
which in any time and place serves as the common medium 
of exchange and the common measure of value. 

It must be remembered, however, that of these two 
functions, use as the common medium of exchange is 
primary. Tliat is to say, use as the common medium of 
exchange brings about use as the common measure of 
value, and not the reverse. But these two uses do not 
always exactly correspond. 

Thus, in New York and its neighborhood one may still 
hear of shillings or York shillings (12J cents) as a measure 
of small values. There is no such coin, this use of an 
ideal shilling being a survival from Colonial times. So, 
in Philadelphia one may hear of fips and levies ; in New 
Orleans of picajames and in San Francisco of bits, sur- 
vivals of the Spanish coinage ; and in the far Northwest of 
" skins," a purely ideal measure of value surviving from 
the time when the Hudson Bay Company bartered with 
the Indians for furs. During, and for some time after, the 
civil war two different common measures of value were in 
co-temporaneous use in the United States — paper money 
and gold. But since the resumption of specie payments, 
though paper money still constitutes the more largely used 
medium of exchange, gold alone has in this country 
become the common measure of value. And though gold, 
sUver and paper are all largely, and generally eo-tempora- 
neously, used throughout the civilized world to-day as 



Chap. III. FUNCTIONS OF MONEY. 503 

supplying the common medium of exchange, the great 
monetary division is between the countries which use gold 
as the common measure of value and the countries which 
use silver. 

But it is still evident, as Adam Smith said, that labor 
(in the sense of exertion) is "the real measure of the 
exchangeable value of all commodities," — "the only 
universal as well as the only accurate measure of value, or 
the only standard by which we can compare the values of 
all commodities in all times and in all places." For it is 
still true, as he said, that "the real price of everything, 
what everything really costs to the man who wants to 
acquire it, is the toil and trouble of acquiring it. What 
everything is really worth to the man who has acquired it, 
and who wants to dispose of it or exchange it for something 
else, is the toil and trouble which it can save to himself, 
and which it can impose upon other people." 

Since labor is thus the real and universal measure of 
value, whatever any country may use as the common 
measure of value can impose little difficulty upon the 
exchanges of its people with the people of other countries 
using other common measures of value. Nor yet would 
any change within a country from one common measure 
of value to another common measure of value bring more 
than slight disturbance were it not for the effect upon 
credits or obligations. In this lies the main source of 
the controversies and confusions with which the " money 
question " is now beset. 

Before going further it would therefore be well, at least 
so far as pertains to the idea of money, to examine the 
relations of credit to exchange. 



CHAPTER IV. 

THE OFFICE OF CREDIT IN EXCHANGES. 

[showing that the advance op civilization economizes 

THE use of money. 

Tendency to over-estimate the importance of money — Credit existed 
before the use of money began, and it is now and always has been 
the most important instrument of exchange— Illustration of ship- 
Avi'ecked men— Adam Smith's error as to barter— Money's most 
important use to-day is as a measure of value.] ^ 

I HAVE souglit to explain the common understanding 
of money and the part that it plays in exchanges by 
supposing a number of travelers. I did so because it is in 
such small and immediate exchanges as a traveler must 
make among strangers that the peculiar usefulness of 
money is most clearly felt. I did not mean to assume that 
the difficulties of barter in all places and times are so great 
as those that in the vicinity of New York at the close of 
the Nineteenth Century would attend the effort of a traveler 
to supply his personal needs by that means of exchange. 

On the contrary there are even now parts of the world 
where a traveler might find a properly selected stock of 
commodities more readily and advantageously exchange- 
able than money itself, and the difficulties of barter have 
certainly increased not merely with the greater use of 
money, but with such modern appliances as post-offices, 

1 Heading not complete in MS. See Prefatory Note. — H. G., Je. 
504 



Chajj.IV. OFFICE OF CREDIT IN EXCHANGES. 505 

steamboats, railways, telegraphs and telephones, and with 
the greater concentration of population and exchanges 
that result from them. Even in our own civilization barter 
must have been a more efficient means of exchange in the 
times that preceded the great industrial development of 
the Nineteenth Century than it is now because people were 
more generally accustomed to it. The old traveling 
merchants and even the old foreign merchants, who sent 
their ships over the maritime world, were largely barterers, 
and the stated fairs of which we have now only faint 
survivals, but which formed so important a part in the 
industrial life of our ancestors, gave place and occasion for 
the meeting of those who wished to make a direct exchange 
of commodities for commodities or services for services 
that are wanting now. 

The effect of the general adoption of the more elaborate 
and on a large scale more efficient methods of an advanced 
civilization is always to relegate to forgetfulness the 
simpler methods previously in use. We have become 
within a few years so accustomed to the electric telegraph 
that we are apt to think that without it men would be 
reduced in carrying messages to the means of transporta- 
tion by land or water, and to forget that telegraphs were 
in use before electric telegraphing was dreamed of. The 
convenience of the lucifer match has made its use so 
universal, that most of us if thrown on our own resources 
without matches, would find it a most serious difficulty to 
light a pipe or make a fire. A hunting party of civilized 
men, if deprived by accident of their ammunition, might 
starve to death before they could kill game even where it 
was abundant. Yet at the beginning of this century lucifer 
matches were unknown, and men killed game before fire- 
arms were invented. 

And so it is with money. Its use is so general in our 
high civilization and its importance so great that we are 



506 OF MONEY. BooTc V. 

apt to over-estimate that importance and to forget that 
men lived and advanced before money was developed, and 
both to underrate the efficiency of the means of exchange 
other than that of money, and the amount of exchanging 
that even now goes on without any more use of money 
than that of a counter or denominator of values. 

It is not only that the simplest form of exchange, the 
transfer of things desired in themselves for things desired 
in themselves, still to some extent continues j but the 
advance of civilization which in an early stage develops 
the use of money as a medium of exchange begins in later 
stages to develop means for dispensing with or much 
economizing this use of money. The exchanges between 
different countries are still carried on without the use of 
money, and so in great measure are domestic exchanges, 
even in the same locality. Not merely in the rural districts 
and in small transactions is there much exchanging with- 
out actual transfer of money, but in the greatest cities, the 
largest transactions, habitually spoken of and thought of 
as though they involved the transfer of money, really take 
place without it. The richer people in fact use compara- 
tively little money, even in personal transactions, and I 
fancy that a man of good credit who kept a bank-account 
might, if he tried to, live from year's end to year's end, 
even in a great city like New York (and with less effort in 
a smaller place), withovit a penny of actual mone}^ passing 
through his hands. His income, if not received in small 
amounts, he would get in checks or similar transfers. His 
larger expenses he could of course pay for in checks, and 
even such things as newspapers, tickets for street-car lines 
or railways, or admission to theaters, postage-stamps, etc., 
he could with a little effort get in the same way. 

Now all this economizing in the use of money, which 
we are accustomed to think of as, and indeed in some of 
its forms really is, the latest development of a civihzation 



Chap. IV. OFFICE OF CREDIT IN EXCHANGES. 507 

that for immemorial ages has been accustomed to the use 
of money, is really in essence a return to something that 
must have been in use for the facilitating of exchanges 
before money was developed among men. That something 
is what we call trust or credit. Credit is to-day and in our 
highest civilization the most important instrument of 
exchange ; and that it must have been from the very first 
appearance of man on this globe the most important 
instrument of exchange, any one can see, if he will only 
discard the assumption that invalidates so much of our 
recent philosophy and philosophic history— the assump- 
tion that the progress of civilization is a change in man 
himself —and allow even prehistoric man the same reason- 
ing faculties that all we know of man in historic times 
shows to belong to him as man. 

Imagine a number of totally shipwrecked men swimming 
ashore in their buffs to an uninhabited island in a climate 
genial enough to enable them to support life. What would 
be their first exchanges ! Would they not be based upon 
the various forms of the proposition, "I will do or get 
this for you, if you will do or get that for me ? " Now, no 
matter where or how they got into this world, this must 
have been the position of the first men when they got here, 
and all that we can reason from with any certainty goes 
to show that these first men must have been essentially 
the same kind of men as we ourselves. 

If there is any difference in priority between them, 
credit must, in the nature of things, have preceded barter 
as an instrument of exchange, and must at least from the 
verj^ first have assisted barter. What more natural than 
that the man who had killed a deer, or made a large catch 
of fish, should be willing to give now while he had abun- 
dance in return for a promise expressed or implied that 
his neighbor when similarly fortunate would in the same 
way remember him f The organization of credit into more 



508 OF MONEY. Boole F. 

elaborate and finer forms goes on with the development 
of civilization, but credit must have begun to aid exchanges 
with the very beginnings of human society, and it is in 
the backwoods and new settlements rather than in the 
great cities that we will to-day find its direct forms playing 
relatively the most important part in exchanges. 

In explaining the origin and use of money, Adam Smith 
much overrated the difiiculties of barter, and in this he 
has been followed by nearly all the writers who have 
succeeded him. Of the condition before the use of the 
metals as money he says (Book I., Chapter IV. of the 
"Wealth of Nations"): 

One man, we shall suppose, has more of a certain commodity than 
he himself has occasion for, while another -has less. The former 
consequently would be glad to dispose of, and the latter to purchase, 
a part of this superfluity. But, if this latter should chance to have 
nothing that the former stands in need of, no exchange can he made 
between them. The butcher has more meat in his shop than he him- 
self can consume, and the brewer and the baker would each of them 
be willing to purchase a part of it. But they have nothing to offer 
in exchange, except the different productions of their respective 
trades, and the butcher is already provided with all the bread and 
beer which he has immediate occasion for. No exchange can, in this 
case, he made hettveen them. He cannot be their merchant, nor they 
his customers ; and they are all of them thus mutually less service- 
able to one another. . . . 

. . . The man who wanted to buy salt, for example, and had noth- 
ing but cattle to give in exchange for it, must have been obliged to buy 
salt to the value of a whole ox, or a whole sheep, at a time. He could 
seldom buy less than this, because what he was to give for it could 
seldom be divided without loss ; and if he had a mind to buy more, 
he must, for the same reasons, have been obliged to buy double or 
triple the quantity, the value, to wit, of two or three oxen, or of two 
or three sheep. If, on the contrary, instead of sheep or oxen, he had 
metals to give in exchange for it, he could easily proportion the 
quantity of the metal to the precise quantity of the commodity which 
he had immediate occasion for. 

Though this explanation of the difficulties attending 
barter has been paraphrased by writer after writer since 



Chap. IV. OFFICE OF CEEDIT IN EXCHANGES. 509 

Adam Smith, it is an exaggeration so gross as uo be 
ridiculous. The differentiation of such trades as that of 
the butcher, brewer and baker, the fact that men habitually 
devote their labor to the production of more of certain 
commodities than they themselves can consume, implies a 
division of labor that could not possibly take place were 
exchange impossible under the circumstances that Adam 
Smith assumes. And it is evident that such circumstances 
would impose no insuperable difficulty to exchange even 
though a true money had not yet come into use. The 
butcher, with meat that he wanted to dispose of, would 
not have refused the exchange offered by the brewer and 
baker because he himself was already provided with all 
the bread and beer that he had immediate occasion for. 
On the contrary, he would say, " I have no immediate use 
for bread and beer because I am already supplied, but I 
will give you the meat you want on your promise to give 
me its equivalent in bread and beer when I call for them." 
Nor need he necessarily wait for his own supply of bread 
and beer to be exhausted before calling on the baker and 
brewer for the fulfilment of their promises, for since man's 
wants are not satisfied with meat, bread and beer alone, 
he might want from the tailor a coat, from the grazier a 
bullock, from the carpenter a house ; and since they could 
not take from him at once full payment in such a 
perishable commodity as meat, he could help out his part 
of the exchange by telling the baker and brewer to give 
to them the bread and beer they had promised him. 

That is to say, it is not necessary to an exchange that 
both sides of it shall be effected at once or with the same 
person. One part or side of the full exchange may be 
effected at once, and the effecting of the other part or side 
may be deferred to a future time and transferred to 
another person or persons by means of trust or credit. 
And by this simple and natural device, and without the 
intervention of money, salt could be exchanged for less 



510 OF MONEY. Book V. 

quantities of beef or mutton than are likely to spoil before 
a single family could consume them. The truth is that 
the difficulties of incidence which Adam Smith speaks of 
here as if they were inseparable from barter are always 
avoided by the use of trust where trust is possible. It is 
only where there are no other exchanges going on and it 
is not probable that the parties concerned will come into 
contact directly or indirectly again, as in a desert or at 
sea, that owing to want of incidence no exchange can be 
made between them,* 

It is reaUy in exchange between those who are unknown 
to each other and do not expect to meet each other again 
that money performs its most indispensable office (as 
illustrated in Book V., Chapter II.). The use of money, by 
which the traveler can easily carry with him the means of 
supplying his needs, has greatly facilitated travehng ; yet 
in the bill of exchange, the letter of credit. Cook's coupons, 
and the book of certified checks, which are so largely 
displacing money for the use of travelers, we come back 
again to the use of trust. 

Trust or credit is indeed the first of aU the instrumen- 
talities that facilitate exchange. Its use antedates not 
merely the use of any true money, but must have been 

* But even here there is often something of the nature of exchange, 
although it may lack the element of certainty. When a boy, passing 
through a street in Philadelphia during a sudden rain, I met a gen- 
tleman standing in a doorway and proffered him the shelter of my 
umbrella, going a little out of my way to take him to his destination. 
As we parted he said, " You and I are not likely to meet again, as I 
am a stranger here ; but one good turn deserves another, and I will 
try to return your service to me by doing such a service for some one 
else, telling him to pass it along." Possibly that little kindly service, 
which I would have forgotten but for the impression his words made, 
maybe "passing along" still. Both good and evil pass on as waves 
pass on. Yet I cannot but think that in the long run, good outlives 
evil. For as to the normal constitution of the human mind, evil must 
bring the wider and more permanent pain, the impulse to its per- 
petuation must meet the greater friction. 



Chap. IV. OFFICE OF CREDIT IN EXCHANGES. 511 

coeval with tlie first appearance of man. Truth, love, sym- 
pathy are of human nature. It is not only that without 
them man could never have emerged from the savage state, 
but that without them he could not have maintained him- 
self even in a savage state. If brought on earth without 
them, he would inevitably have been exterminated by his 
animal neighbors or have exterminated himself. 

Men do not have to be taught to trust each other, except 
where they have been deceived, and it is more often in our 
one-sided civilization, where laws for the coUeetion of 
debts have weakened the moral sanction which public 
opinion naturally gives to honesty, and a deep social 
injustice brings about a monstrous inequality in the 
distribution of wealth, and not among primitive peoples, 
that the bond is of tenest required to back the simple word. 
So natural is it for men to trust each other that even the 
most distrustful must constantly trust others. 

And trust or credii: is not merely the first of the agencies 
of exchange in the sense of priority ; it yet is, as it always 
has been, the first in importance. In spite of our extensive 
use of money in effecting exchanges, what is accomplished 
by it is small as compared with what is accomplished by 
credit. In international exchanges money is not used at 
all, while the great volume of domestic exchange is in 
every civilized country carried on by the giving and 
cancelation of credits. As a matter of fact the most 
important use of money to-day is not as a medium of 
exchange, though that is its primary use. It is that of a 
common measure of value, its secondary use. Not only 
this, but with the advance in civilization the tendency is 
to make use of credit as money ; to coin, as it were, trust 
into currency, and thus to bring into use a medium of 
exchange better adapted in many circumstances to easy 
transfer than metallic money. The paper money so largely 
in use in aU ci^dlized countries as a common medium of 
exchange is in reality a coinage of credit or trust. 



CHAPTER V. 

THE GENESIS OF MONEY. 
[showing that the law of gratifying desires with 

THE least exertion PROMPTS THE USE FROM TIME TO 
TIME OF THE MOST LABOR-SAVING MEDIUM AVAILABLE. 

Money not an invention, but developed by civilization— It grows with 
the growth of exchanges— Exchange first of general commodities 
—Then of the more convenient commodities— Then of coin, whose 
commodity value comes to be forgotten— Illustration of the Ameri- 
can trade dollar— The lessening uses of commodity money and 
extensions of credit money— Two elements in exchange value of 
metal coin : intrinsic, or value of the metal itself, and seigniorage— 
Meaning of seigniorage— Exchange value of paper money is seign- 
iorage—Use of money not for consumption, but exchange— Propri- 
etary articles as mediums of exchange— Mutilated coins— Debased 
coinage — When lessening metal value in coins does not lessen 
circulating value— This the reason why paper money exchanges 
equally with metal money of like denomination.] i 

MONEY is not an invention, but rather a natural 
growth or development, arising in the progress 
of civilization from common perceptions and common 
needs. The same fundamental law of human nature which 
prompts to exchange, the law by which we seek to satisfy 
our desires with the least exertion, prompts us with the 
growth of exchanges to adopt as a medium for them the 
most labor-saving instruments available. 

1 The part of chapter heading witliin brackets not in MS. — H.G., Jr. 
512 



Chap. V. THE GENESIS OF MONEY. 613 

All exchange is of services or commodities. But as 
commodities are in reality concrete services they afford 
from the first the readiest media of exchange, performing 
that office and serving as measures of value not only for 
other commodities but for direct services. 

But commodities (under which name we include all 
movable products of labor, which, as such, have value so 
long as they retain the capacity of ministering to desire) 
greatly differ in their availability as media of exchange. 
Those best fitted for that use are those which are least 
perishable, which can be most easily passed from hand to 
hand and moved from place to place; which are most 
uniform in their articles and most homogeneous in their 
structure, so that they may be estimated with most cer- 
tainty and divided and reunited with the least waste, and 
Avhose value is from their general use best known and 
most quickly recognized. 

In proportion as these qualities are united in one com- 
modity there is a natural tendency to its use as a medium 
for the exchange of other things, and this use tends again 
to the wider knowledge and quicker recognition of its value. 

In primitive societies, or in the outposts of civilization 
where better means were not readily obtainable, skins, 
shells, salt, beads, tobacco, tea, blankets, and many other 
of the less perishable and more portable commodities, have 
in an imperfect way and to a limited extent been used as 
common media of exchange and common measures of value, 
thus becoming the money of the time and place.* But 

* Adam Smith and most of the subsequent writers have included 
cattle in the list of things that have in rude times served this func- 
tion. Smith says, Book I., Chapter lY., "Wealth of Nations" : 

" In the rude ages of society, cattle are said to have been the common 
instrument of commerce ; and, although they must have been a most 
inconvenient one, yet in old times we find things were frequently 
valued according to the number of cattle which had been given in 



514 OF MONEY. Boole V. 

the metals, and particularly the precious metals, so well 
fill all the requirements of a medium of exchange, that 
wherever they have become well known mankind have 
applied them to this use. At first they were doubtless 
weighed, and perhaps tested, with every passage from 
hand to hand ; but as their use for purposes of exchange 
became more common, the same desire to economize labor 
which leads the baker to give his bread the form and shape 
of loaves or rolls, and the tobacconist or tea-dealer to put 
up his commodities into uniform packages, must soon have 
led to the running of the metals used as media of exchange 
into pieces of definite weight and purity, so that they may 
be passed from hand to hand without the trouble of 
weighing and testing them. To make these pieces of 
circular form, since that is the most convenient and the 
least subject to abrasion in handling, and to afford evidence 
that they yet retained their original substance by stamping 
their sides and edges, are obvious devices that seem to have 

exchange for them. The armor of Diomede, says Homer, cost only- 
nine oxen ; but that of Grlancus cost an hundred oxen." 

Althoiigh I have hitherto accepted this statement, closer consid- 
eration now convinces me that the inconvenience attaching to such 
a use of cattle never could have permitted them to take the place of 
money. As for the authority of Homer, the state of the arts assumed 
in the Iliad would imply the use of metal money, and the Marquis 
Gainier has contended that the oxen spoken of were really coins. 
But this supposition is not the only alternative to supposing that the 
allusions in Homer's poems are to be taken as indicating that cattle 
were in use as the common medium of exchange and common mea- 
sure of value. In ordinary speech, and especially in poetry, which 
eschews the exactness of monetary terms, such things as cattle, lands, 
slaves, have always been iised to convey a vague but striking idea of 
wealth or value ; and it seems far more reasonable so to understand 
the references of ancient writers than to take them as proof that 
commodities so inconvenient to divide, preserve and transfer as cat- 
tle ever passed from the position of an article of exchange to that of 
its common medium and measure. 



Chap. V. THE GENESIS OF MONEY. 515 

been adopted wherever sufficient skill in the arts had been 
attained and the metals were in this way used. And thus 
by a natural development in use, a commodity peculiarly 
adapted to the purpose becomes, in the shape of coined 
money, the commodity which serves as a medium of 
exchange and measure of value for all commodities and 
services, and which has been in use among peoples of the 
most advanced civilization for long ages and still remains 
in use, though not in exclusive use, to our day. 

But while the first purpose of coinage is, we may safely 
assume, to save the trouble of weighing and testing the 
commodity which has become a common medium of 
exchange, the general use of these coins as giving evidence 
of weight and purity must gradually have the effect of 
transferring the quality of ready exchangeability from the 
commodity to the coin. The habit of weighing and testing 
passes away ; even the amount of the commodity embodied 
in the coin is, by the great majority of those who use it, 
forgotten or not heeded ; and the shape, size, color and 
devices of the coin become the things that give it circula- 
tion. An American Eagle, or ten-dollar piece, contains so 
many grains of gold of a certain fineness, and exchanges 
at the value of the gold. But not one in ten thousand of 
those who use this coin, and who know its value in rela- 
tion to other things that they are in the habit of buying 
and selling, know how many grains of gold it contains. 
A man with a ten-dollar gold piece will find no difficulty 
in the United States in fairly exchanging it for anything 
he may happen to want, but he would find much difficulty 
in fairly exchanging the same quantity of gold in the 
shape of dust or of an ingot, anywhere except at a mint 
or with a bullion dealer. 

A curious evidence of this tendency to accept the sign 
rather than the substance is given in the history of the 
American trade dollar. For many years much of the ex- 



516 OF MONEY. Booh V. 

port of silver to China has been in the shape of Mexican 
dollars, the stamp of which has become known there as 
evidencing a certain weight of silver. Thinking that it 
might take the place in China of the Mexican coin the 
American government in 1874 coined what was called a 
trade dollar. It was a better finished and handsomer coin 
than the Mexican dollar, and contained a greater weight of 
silver. But the Chinese preferred a coin whose look they 
had become familiar with, to one that was new to them, 
even though the latter was of greater intrinsic value. The 
attempt was a failure, and after an instructive domestic 
experience, which it is not worth while to speak of here, 
the coinage of the trade dollar was stopped. 

Now this transfer of ready exchangeability from the 
commodity to the coin, with the accompanjdng relegation 
of the commodity itself to the same position in exchange 
held by other commodities, which takes place as a result 
of the use of coin money, is a matter of great importance, 
leading ultimately to a complete change in the nature of 
the money used. 

In the coinage of the precious metals the use of com- 
modities as a medium of exchange seems to have reached 
its highest form. But the very same qualities which of 
all commodities best fit the precious metals for this use, 
attach or may attach in stiU higher degree to something 
which, having no material form, may be passed from person 
to person or place to place without inconvenience from 
bulk or weight, or danger of injury from accident, abrasion 
or decay. This something is credit or obligation. And 
as the advance of civilization goes on, the same tendency 
to seek the gratification of desire with the least exertion, 
which mth a certain advance of civilization leads to the 
development of commodity money, leads with its further 
advance to the utilization of credit as money. 

Movement in this direction maybe distinguished along 
three lines: 1— The admixture in coinage of obligation 



Chap. V. THE GENESIS OF MONEY. 517 

value with production value. 2— The use of obligation 
or credit as representing an economizing commodity 
money. 3— The use of pure credit money. 

We are here considering only money. Not only is credit 
a facilitator of exchange before money of any kind is 
developed, but the same social progress which shows itself 
in the development of money also shows itself in the 
extension of credit. If the use of money supersedes the 
use of credit in some exchanges, it is only where the use 
of credit is difficult and inconvenient ; and in facilitating 
exchanges over wider areas than the use of the primitive 
forms of credit would have been equal to, it also increases 
that mutual knowledge and mutual desire to exchange 
that are necessary to the extension of credit. Although the 
primary and local function of money is that of affording 
a common medium of exchange, its secondary function of 
affording a common measure of values soon becomes of 
greater importance, and the extension of credits in our 
modern civilization is far more striking and important 
than the extensions in the use of money as a medium of 
exchange. Though the use of any particular money as a 
medium of exchange is still local, the money of any one 
country circulating only to a very limited extent in other 
countries, yet the development of credits has been such 
that the exchange of commodities to the ends of the earth 
and among peoples using different moneys as mediums of 
exchange, is conducted by means of it. But what we are 
considering now is not this development of commercial 
credits, but the way in which the use of commodity money 
passes into the use of credit money ; or in other words, the 
way in which the coinage of production value into a 
convenient medium of exchange passes into the coinage 
of obligation values. 

The demand for any metal in exchange is at first, like 
the demand for other things in exchange, a demand for 
consumption; and its value or rate of exchange, is 



518 OF MONEY. Booh V. 

determined by the cost of producing it in merchantable 
form. As one or another of the metals began to come 
into use as a medium of exchange, the largest demand for 
it would doubtless for some time still be for consumption, 
and any change in the form of the metal made to fit it for 
this new use would at first entail little or no greater cost 
than that of the ordinarily merchantable form. Thus the 
value of the metal used as money would at first be no 
greater than that of the same metal intended for consump- 
tion. But when coinage fairly began, something more of 
labor would be required to produce the stamped and 
finished coin than to produce the mere ingot of merchant- 
able shape. 

Hence there are, or may be, two elements in the 
exchange value of metal coin— (1) the intrinsic value, or 
value of the metal itself, which is governed by the cost of 
producing it in merchantable form ; and (2) the cost of 
changing it from that form into the form of finished coin. 
This second element, the charge for coinage, is called 
seigniorage, from the idea that the coining of money has 
from the earliest times been deemed a function of the 
sovereign— the seignior or lord— as representative of 
organized society or the state. 

There are two different ways in which it has been 
customary to pay for turning a merchantable material 
into a finished product. Thus : From time immemorial 
until the present when machinery has begun to revolu- 
tionize industrial methods, it was the custom for the man 
who wanted a suit of clothes to buy the material, take it 
to a tailor, and pay him for the work of making it into a 
suit. The tailor was not presumed to keep any of the cloth, 
and if he did so it was called " cabbage." During the 
same time it was, on the contrary, the universal custom for 
the miller to get his pay by keeping a part of the material 
brought him for conversion. The farmer or purchaser 



CJiap. V. THE GENESIS OF MONEY. 519 

brought his grain to the mill, receiving back less than its 
equivalent in meal, the difference being the toll that the 
miller retained for the service of grinding. The manu- 
facturer who is now succeeding both the old tailor and 
the old miller buys the material and sells the finished 
product. 

Now the conversion of metal into coin seems always to 
have been paid for in the same way as the conversion of 
grain into meal or flour, by a toll or deduction in the 
return. This toll or seigniorage may be less or more than 
the actual cost of coinage. It is what the lord or state, 
who has the sole privilege of coinage, chooses to take for 
it; the difference between the rate at which metal is 
received or bought at the mint and the rate at which it is 
returned or issued in coin. 

Had the coinage of metal into money been left to the 
free competition of individual enterprise, the charge for 
this conversion would have tended to the lowest point at 
which coin could be produced in sufficient quantities to 
supply the demand. But so far as we can see this has 
never been the case. The primary object of coinage being 
the certification of weight and fineness, that is obviously 
best assured by the stamp of the highest and most widely 
known authority, that of the sovereign or state. Where 
coinage is thus monopolized in the hands of the sovereign, 
the element of seigniorage in the value of coin may be 
eliminated altogether by the agreement or practice of the 
sovereign to return in coin the full amount of metal 
brought to his mints, as is to-day the case in some countries 
with some metals ; or it may be extended so as to become 
the most important of the two elements in the value of 
coin by the refusal of the sovereign to coin on other terms 
and the exclusion or refusal of other coinage. Indeed, 
by the selection of some very cheap commodity for the 
material of coinage, it may become practically the only 



520 OF MONEY. Book V. 

element of value. For, as Ricardo pointed out, the whole 
exchange value of paper money may be considered as a 
charge for seigniorage. 

The reason of this fact that, the issuance of money being 
a monopoly, the element of intrinsic value may be partially 
or entirely eliminated without loss of usefulness, is to be 
found in the peculiar use of money. The use of other 
commodities is in consumption. The use of money is in 
exchange. Thus the intrinsic character of money is of no 
moment to him who receives it to circulate again. The 
only question that he is concerned with is as to the 
readiness of others to receive it from him when he wants 
in his turn to pass it on. And this readiness where coined 
money comes into use as the common medium of exchange 
is associated with coinage, which becomes the badge or 
stamp of circulation. 

There are to-day certain commodities having a large 
and wide- spread sale in neatly put up packages under pro- 
prietary names, such as Pears' Soap, Colman's Mustard, 
Royal Baking Powder, and so on. The reputation as to 
quantity and quality of contents which has been secured 
for the packages bearing such a trade-mark gives their 
manufacturers proprietary profits often very considerable 
that are analogous to seigniorage. For a short time and 
to a small extent these profits might be increased by 
decreasing the quality of the goods. Those who bought 
them to sell again would at first be unconscious of the 
difference and would buy as before. But as soon as they 
reached the hands of purchasers for consumption, the 
difference would be detected and the demand would 
decline, for the demand of those who buy such things to 
sell again springs from the demand of those who buy for 
consumption. 

But (and the expedients resorted to in times of sudden 
and acute monetary scarcity may suggest this) let us 



Chap. V. THE GENESIS OF MONEY. 521 

imagine some such proprietary packed article to pass into 
use as the medium of exchange. The increased demand 
caused by the new and wider use would enable the owners 
of the trade-mark, by restricting supply of which they 
would have exclusive control, to carry up the value of the 
article so far above that of the contained commodity that 
it would pass out of use for consumption. Yet so long as ' 
the demand for it as a medium of exchange continued, it 
would have use for that purpose, and the owners of the 
trade-mark could not merely keep up the price, but could 
with impunity reduce the quantity and quality of the 
contents of their packages to almost any extent. For 
since every acceptance of a thing in exchange is in reality 
a purchase of it, and every transfer of it in payment of 
an obligation or in return for any other thing is in reality 
a sale, the entii-e demand for an article used only as a 
medium of exchange would be with a view to subsequent 
sale— would be a demand of merchants or traders, who are 
not concerned with the intrinsic qualities of what they buy 
to sell again, but only with its salability. 

In the illustration I have used, the possibility of les- 
sening the quality or quantity of the packages without 
lessening their value as a medium of exchange, is depend- 
ent on their having passed out of use for consumption 
and the demand for them being entirely the demand 
for use in exchange. For, so long as any part of the 
demand was a demand for consumption, the lessening of 
commodity value would, by checking the total demand, 
operate at once to reduce value not merely of that part 
used for consumption, but that part used for exchange. 

Now the first coined money being commodity money, 
the demand for it would be for a long time, in part at least, 
a demand for consumption. In the simpler stage of the 
arts, coin would be much more frequently than now beaten 
or melted into plate, adornments, ornaments, etc. And 



522 OF MONEY. Book V. 

more important still perhaps, it would continue to be used 
as a commodity in the exchange with other countries. 
It is probable that the coinage of the more important 
sovereigns had a far wider area of diffusion when inter- 
national commerce was much less than it is now. For, 
although the area of commerce was more limited than 
now, there was proportionately more of the area without 
any coinage of its own, and the development of credit as 
a medium of international exchanges, the use of coin in 
them as a conveniently portable commodity, was probably 
relatively greater than now. 

Now, the demand for coin sent abroad, as American 
gold sent to England, like the demand for coin for use in 
the arts, is a demand for use in consumption and would 
quickly show itself in a lessening of aggregate demand 
and consequently of value, upon a reduction of the com- 
modity value of coin, no matter how strictly the workmen 
of the mints were sworn to secrecy, as was the device of 
sovereigns who contemplated deteriorating their coinage. 

But still more important is the fact that in order to 
keep up the value of coin while diminishing its intrinsic 
value it is necessary that the supply be strictly limited. 
But the sovereigns, whether princes or republics, who 
have resorted to the expedient of debasing their coinage 
have generally done so for the purpose of turning the 
same amount of metal into more coin, rather than that of 
keeping the same amount of coin in circulation with the 
use of less metal, or have been unable to resist the temp- 
tation to do this when they found opportunity. 

That the circulating value of money need not necessarily 
depend on its intrinsic value, must have been clear to 
discerning men as soon as the habitual use of coined 
money had made its signs and emblems the accepted 
tokens of value, so that it passed from hand to hand 
without testing and usually without weighing. The fact 



Chap. V. THE GENESIS OF MONEY. 523 

that coins that had lost something of their intrinsic value 
by abrasion continued to pass current, must have made 
clipping and filling and sweating, early devices of the 
cunning, which raised figures and milled edges would not 
prevent, unless supplemented by such mercantile stipulation 
or legislative enactment as secured common agreement not 
to accept such coins. This of itseK would show that the 
circulating value of a coin did not as a matter of fact 
depend upon the value of the material it contained. 

Thus to the ministers and advisers of the sovereigns, 
who seem everywhere to have assumed from the first 
exclusive privilege of coining, it must have seemed an 
easy and safe economy to reduce the cost of the coin by 
substituting for its material some part of cheaper metal. 
Hence came those numerous and repeated reductions in 
the value of coins which are a marked feature in all 
monetary history ; which have reduced the English pound 
sterling to but a fraction of its original equivalence to a 
pound troy, and in other countries have brought about a 
still greater difference. 

So far as the principal and most important coinage is 
concerned, these attempts have from time to time ended 
in disaster, and in the final reunion of cii'culating value 
with commodity value, either by the rejection and with- 
drawal of the debased coin and a recoinage, or more 
frequently by the lowering of the circulating value to the 
level of the commodity value. 

This, however, is not a necessary result of a debase- 
ment of coinage, as is so often assimied. A less valuable 
metal may be substituted in a coin for a more valuable 
metal without lessening the circulating value, provided— 
and this is the essential condition — it continues to 
be as hard for those who use the coin in exchanges to 
get the one as it was to get the other ; or in other words 
that it continues to represent the same exertion. 



524 OF MONEY. Booh V. 

For all exchange is really the exchange of labor, and 
the rate at which all things tend to exchange for all other 
things is determined by the relative difficulty of obtaining 
them. That a ten pound note of the Bank of England, 
having practically no intrinsic value, will exchange for 
ten gold sovereigns, having an intrinsic value of that 
amount of gold— that a five dollar note of the government 
of the United States, having no intrinsic value ; five silver 
dollars, having an intrinsic value of something like two 
dollars and a half; and a five dollar piece, having an 
intrinsic value of five dollars, will exchange in this country 
for each other or for the same amount of commodities or 
services of any kind, is because the difficulty of getting 
these things, the quantity and quality of exertion ordinarily 
required to obtain them, is precisely the same. Should it 
become in the slightest degree harder to get one of these 
things than the others, this will show itseK in a change of 
the rate at which they exchange. In this case we say that 
the one commands a premium or that the others bear a 
discount. 

The difficulty of procurement which brings to the same 
value the gold coin, silver coin and notes spoken of, so 
that they wUl exchange for each other or for equal quan- 
tities of other things, is, though of the same intensity, of 
different kinds. In the gold coin, it is the difficulty of 
mining, refining and transporting the metal (for neither in 
Great Britain nor in the United States does the govern- 
ment make any charge or exact any seigniorage" for the 
coinage of gold). In the silver coin, it is partly the difficulty 
of obtaining the metal and partly the difficulty imposed 
by the only terms on which the government will coin sUver 
dollars— or in other words, by the seigniorage it demands. 
In the notes, it is the difficulty imposed by the restrictions 
on the issuance of such notes— or, as it may be considered, 
all seigniorage. What in short, gives to the paper notes 
or coins of small intrinsic value the same exchange value 



Chap. V. THE GENESIS OF MONEY. 525 

as the gold coin, is that the government concerned, which 
has the monopoly of coinage in its respective country, will 
not issue one of them on any less terms than it does the 
other, thus making them all to the individual equally hard 
to get. 

What has everywhere caused the failure of the innumer- 
able attempts to reduce the intrinsic value of the principal 
and important coin, without reducing its circulating value, 
is not the impossibility of the task, but the fact that the 
sovereigns who have attempted it did not, and perhaps 
could not, observe the necessary condition of success, the 
strict limitation of supply. But the purpose of the 
sovereigns, whether princes or republics, ia debasing 
coinage has been, or under pressui*e of the temptation has 
become, not an attempt to make a less value in metal 
serve for the same quantity of coin, but to issue a greater 
quantity of coin on the same value in metal. Thus instead 
of restricting the supply of coin to the point where the 
demand for its use as a medium of exchange would keep 
up its exchange value irrespective of the lessening in its 
intrinsic value, they proceeded at once to increase supply 
on a falling demand, and met the inevitable depreciation 
of circulating value by fresh increase of supply, so that 
no matter how much the intrinsic value of the coin was 
reduced, its circulating value followed. 

[Principle same as that which caused depreciation in French 
assignat, Continental money, etc.] ^ 

It is this fall of circulating value with the fall of intrinsic 
value wliere it is not kept up by restriction of supply that 
has through succeeding depreciations reduced the English 
pound sterling to but a fraction of its original equivalence 
to a pound troy, and in other countries has brought about 
a still greater difference. 

J Note in MS. indicating illustration to be developed by author. — H. G., Jb. 



CHAPTER VI. 

THE TWO KINDS OF MONEY. 

[showing that one originates in value prom produc- 
tion, THE OTHER IN VALUE PROM OBLIGATION. 

Money peculiarly the representative of value— Two kinds of money 
in the more highly civilized world— Commodity money and value 
from production— Credit money and value from obligation— Of 
credit money — Of commodity money — Of intrinsic value — Gold 
coin the only intrinsic value money now in circulation in the 
United States, England, France or Germany.] ^ 

"HILE value is always one and the same power, that 
of commanding labor in exchange, there are as we 
have seen, with reference to its sources, two different 
kinds of value — that which proceeds from production and 
that which proceeds from obligation. Now money is pecu- 
liarly the representative of value— the common medium or 
flux through which things are exchanged with reference 
to their value, and the common measure of value. And 
corresponding to and proceeding from this distinction 
between the two kinds of value, there are, we find, two 
kinds of money in use in the more highly civihzed world 
to-day — the one, which we may call commoditj'' money, 
originating in the value proceeding from production ; and 
the other, which we may call credit money, originating in 
the value proceeding from obligation. 

This distinction has of course no relation to differences 
of denomination, such as those between English pounds, 

1 Merely the title in this heading appears in MS. — H. G., Jb. 
526 



Chap.ri. THE TWO KINDS OF MONEY. 527 

French francs and American dollars. These are but 
differences of nomenclature. Nor yet does it coincide 
with differences in the material used as money, as for 
instance that between metal money and paper money. 
For while all paper money is credit money, all metal 
money is not commodity money. What I understand by 
commodity money is money which exchanges at its value 
as a commodity, that is to say, which passes current at no 
more than its " intrinsic value," or value of the material 
of which it is composed. Credit money is money which 
exchanges at a greater value than that of the material of 
which it is composed. In the one case the whole value for 
which the money exchanges is the value it would have as 
a commodity. In the other case the value for which the 
money exchanges is greater than its commodity value, and 
hence some part at least of its exchange value as money is 
given to it by credit or trust. 

For instance, a man who exchanges ten dollars' worth 
of wheat for a coin containing ten dollars' worth of gold 
makes in reality a barter. He exchanges one commodity 
for an equal value of another commodity, crediting or 
trusting nobody, but having in the coin he has received a 
commodity which, irrespective of its use as money, has an 
equal value to that he gave. But the man who exchanges 
ten dollars' worth of wheat for a ten-dollar note receives 
for a commodity worth ten doUars what, as a commodity, 
has only the value of a bit of paper, a value practically 
infinitesimal. Wliat renders him wilKng to take it as an 
equivalent of the wheat is the faith or credit or trust that 
he can in turn exchange it as money at the same valuation. 
If he drops the coin into the sea, he loses value to the 
extent of ten dollars, and the sum of wealth is lessened by 
that amount. If he burns the paper note, he suffers loss, 
to the value of ten dollars, but he alone ; the sum of wealth 
is only infinitesimaUy lessened. Paper money is in truth 



528 OF MONEY. Book V. 

of the same nature as the check or order of an individual 
or corporation except (and in this lies the difference that 
makes it money) that it has a wider and readier credit. 
The value of the coin of full intrinsic value, like the value 
of the wheat, is a value that comes from production. But 
the value of the paper money is, like the value of the check 
or order, a value from obligation. 

The first money in use was doubtless a commodity 
money, and there are some countries where it is still the 
principal money, and places perhaps where it is the only 
money. But in the more highly civilized countries it has 
been very largely superseded by credit money. In the 
United States, for instance, the only commodity or intrinsic 
value money now in cii'culation is the gold coinage of the 
United States. Our silver doUars have an intrinsic or 
commodity value of only some fifty cents, and the value 
of our subsidiary coinage is still less. That they circulate 
in the United States at the same value as gold shows that 
their exchange value has no reference to their intrinsic 
value. They are in reality as much credit money as is the 
greenback or treasury note, the difference being that the 
stamp, which evidences their credit and thus secures their 
circulation, is impressed not on paper, but on a metallic 
material. The substitution of v/hat is now the cheapest 
of metals, steel, or the utter ehmination of intrinsic value, 
woidd not in the slightest lessen their circulating value. 
What is true of the United States in this respect is also 
true of England, of France, of Grermany, and of all the 
nations that have adopted gold as the common measure of 
value. Their only commodity money is certain gold coins ; 
their other coins being token or credit money. In the 
countries that have retained silver as the common measure 
of value the standard coin is generally commodity money, 
but the subsidiary coins, having less intrinsic value, are in 
reality credit money. 



X X 9 



INDEX. 



Adapting, its place in produc- 
tion, 327-330, 332, 353-354, 358, 
400, 414. 

Agriculture, alleged law of di- 
minishing returns in, 174, 335- 
338, and the Malthusian the- 
ory, 336, 337-338 ; confusion of 
the spacial law with, 351-356; 
relation of space to, 357, 358. 

Analysis, definition of, 29. 

Animals, how distinguished from 
man, 11-18, 19, 29, 36, 51, 53, 
56, 59, 77, 82, 85, 287, 291-292, 
397-399; how they resemble 
man, 13-14, 85, 291; and in- 
stinct, 15-18,291-292,397-398; 
cooperate, 397-399. 

Antinomy, 345-346, 348. 

Aiistotle, final cause, 50 ; defini- 
tion of wealth, 132. 

Austrian school, displaced the 
classical school, 124, 208-209, 
215, 252 ; value, 218, 252 ; mar- 
ginal utilities, 218, 237; ab- 
sence of scientific method in, 
448-449. 

Bacon, Francis, inductive logic, 
96-97; right reasoning, 139; 
Idols of the Forum, 340. 

Bain, definition of wealth, 123. 

Baird, Henry Carey, deduction 
and induction, 93. 

Beckford, "Vathek" and Font- 
hill, 369. 

Biddle, Clement C, validity of 
property, 184. 



Bisset, Andrew, natural rights, 
194. 

Bohm-Bawerk, Eugen V., does 
not define wealth, 124; teach- 
ings of, 208-209. 

Bowen, definition of wealth, 
122. 

" Britannica, Encyclopaedia," old 
political economy dead, 205- 
206. 

Buckle, on civilization, 25 ; im- 
portance of Smith's "Wealth 
of Nations," 89; selfishness in 
political economy, 89-90. 

Bull, Irish, from what its humor 
comes, 274. 

Cairnes, J. E., does not define 
wealth, 124; prediction as to 
political economy, 179-181. 

Capital, confusions as to, 120- 
121, 176-177; meaning fixed in 
"Progress and Poverty," 211, 
270-271, 298-300 ; wealth that 
is called, 293-300; all, is 
wealth, 294-295, 296; but all 
wealth not, 294-295, 296 ; paper 
money not, 299n.; other things 
not, 296-297 ; definition of, 293- 
294, 296, 299, 413; the third 
factor in production, 406, 413- 
415 ; when it may aid labor, 
414; it does not use labor, but 
is used by labor, 414-415. 

Carey, Henry C, induction and 
deduction, 93-94 ; protection- 
ism, 196. 



529 



530 



INDEX. 



Carlyle, Thomas, repugnance to 
"dismal science," 88; German 
thought in England, 196. 

Catallactics, substitute for po- 
litical economy, 128-129. 

Cause, reason the power of trac- 
ing its relations, 29-30, 33, 45- 
46; power that apprehension 
of its relations gives, 33-38; 
relative meaning of, 46-47; 
ultimate or sufficient reason, 
48-49 ; Aristotle on final, 
50 ; doctrine of final, 50 ; will 
or spirit the only explanation 
of first or final, 51-54, 56-57, 
79, and called God, 54, 57, 79; 
MilFs confusion, 440-443. 

Chalmers, Dr., does not define 
wealth, 124; of natural rights, 
186-187. 

"Chambers' Encyclopedia," 

death of old political econ- 
omy, 206-207. 

Christ, Kingdom of Heaven re- 
vealed to babes, 139-140 ; why 
He sympathized with the poor, 
306-307. See Jesus. 

Christianity, made to soothe the 
rich, 174. 

Civilization, extensions of man's 
powers in, 19-23, 29-43, 91 ; rise 
of, to what due, 20-22 ; what it 
means, 24-28, 37-38 ; vagueness 
as to what it is, 24-25, Guizot, 
25, Buckle, 25; its relation to 
the state or body politic, 25-28 ; 
to the body economic or Greater 
Leviathan, 27-28, 118, 399-400, 
428 ; origin and genesis of, 29- 
38 ; the germ of, 33-34 ; used as a 
relative term, 37 ; justice, high- 
est aspect of, 35 ; how it devel- 
ops, 39-43 ; as to history of, 37 ; 
extent of cooperation in mod- 
ern, 20-22, 27, 36-38, 39-40, 43, 
325, 378-379, 426; machinery 
in, 379; exchange at root of, 
399-401 ; cause of death of, 439; 
makes no changes in man as 
man, 507. 

Clark^ definition of wealth, 123. 

Classical school, 208. 



Commodity, as a term for an arti- 
cle of wealth, 282. 

Compensation, Mill on, 137-138 ; 
Dove, 192-193; Spencer, 192- 
193. 

Competition, in determining 
value, 251, 253; office of, in 
production, 402-403 ; the life of 
trade, 402, 403 ; regarded as an 
evil, 402; its origin, 403; a 
natural law, 403. 

Confucius, meaning of recipro- 
city, 306. 

Consequence, meaning of, 45-46 ; 
invariable sequence, 46, 55-56, 
80, 435-436, 437 ; of laws of na- 
ture, 44-57, 80, 435-436, 437, 
440-443 ; Mill's improper use of 
word, 440-443. 

Consumption, not concerned with 
distribution, 426. 

Cooperation, gives rise to civiliza- 
tion, 20-22, 27, 36-38, 39^0, 43 ; 
meaning in current political 
economy, 371, and its true mean- 
ing, 372 ; the two ways, 371-381 ; 
of combination of effort, 372- 
373, 380 ; of division or sep- 
aration of effort, 372-381; of 
machinery, 379; extent of, in 
modern civilization, 325, 378- 
379, 426 ; Smith on division of 
labor, 182, .372, 374 ; his three 
heads, 380; a better analysis, 
380-381 ; its two kinds, 382-396 ; 
of directed or conscious, 383- 
385, 391-393 ; of spontaneous or 
unconscious, 385-396 ; depen- 
dent on exchange, 332, 378, 399, 
401 ; intelligence that suffices 
for one impossible for the other, 
385, 394-395 ; conscious, will not 
suffice for the work of the un- 
conscious, 393-395 ; this the 
fatal defect of socialism, 391- 
396; the spiritual element in 
production, 391, cannot be 
combined, 392 ; man power and 
mind power, 392-393; the 
Greater Leviathan, 22-23, 27- 
28, 36, 118, 395-396, 399-400, 
428 ; all living things engage in, 



INDEX. 



531 



399, bees and ants from in- 
stinct, 397-399, man from rea- 
son, 398-399. 

Copernicus, astronomy before, 
138 ; his prudence, 168. 

Corn-laws, significance of agita- 
tion and repeal of, 175-176. 

Creation of the world, and time, 
367-368. 

Credit, its office in exchanges, 
491-493, 504-511, 517, 526-528 ; 
paper money a coinage of, 
511. 

Davis, Noah K., inductive and 
deductive logic, 98-99. 

Debt, cannot be wealth, 137, 277- 
278; value from obligation, 262; 
slavery, 262 ; not capital, 296. 

Deduction, as used in political 
economy, 92-100. 

Desire, man's reason in the satis- 
faction of, 17-18 ; cooperation 
or the Greater Leviathan in the 
satisfaction of, 22-23, 27, 36, 70, 
379; reason behind, 31-32; ex- 
change springs from, 37, 512 ; 
causal relations, 50-51 ; the 
prompter of man's actions, 76, 
81-82, 247, 285, 326, 411, and 
satisfaction of, the end and 
aim, 81-82, 83, 285, 326, 411; 
distribution in the satisfaction 
of, 427-428 ; man could not ex- 
ist without, 83; philosophies 
teaching extinction of," 83 ; 
working and stealing in the 
satisfaction of, 71-73; funda- 
mental law of political econ- 
omy, 76-77, 80, 91, 99, 254, 268, 
332; width and importance of 
the field of political economy, 
81-85, 303, 324-325 ; many kinds 
of, 82-83, 85, 247; subjective 
and objective, material and im- 
material, 83-85 : and value, 213- 
221, 245, 249, 252-256, 260, 261, 
268; nature and measurement 
of, 246-247; wealth and the 
satisfaction of, 279-280, 285- 
292, 340, 357; capital and the 
satisfaction of, 293-297; three 



modes in production of satis- 
fying, 332; origin of competi- 
tion and, 403 ; genesis of money 
and, 512-525. 

Dickens, Charles, repugnance to 
the "dismal science," 88. 

Diminishing returns, alleged 
law of, 174, 335-338; the real 
law of, 340, 355-356, 357-364, 
368. 

Distribution, current confusion as 
to laws of, 177, 460-461; the 
laws of, and their correlation 
treated in ' ' Progress and Pov- 
erty," 202 ; of value from obli- 
gation, 272; includes neither 
transportation nor exchange, 
326, 400, 425-426, nor taxation, 
426, nor consumption, 426 ; der- 
ivation and uses of the word, 
423-429 ; original meaning, 434 ; 
nature of, 430-439 ; a continua- 
tion of production, 426-427, 
438-439 ; deals with future pro- 
duction, 438-439, and affected 
through production, 446-447, 
453; laws of, belong to the nat- 
ural order, 428 ; not concerned 
with human laws, 432, but so 
taught by classical school, 430- 
435 ; Mill's confusion, 430-435, 
440-443, 447-449, 455-459 ; com- 
mon perception of this, 440-449 ; 
concerned vrith natural laws, 
435-439, 450^51, 454-459 ; rela- 
tion to the moral law, 437-438, 
451-453 ; of the death of civili- 
zation, 439 ; human will power- 
less to affect, 443-447 ; the gi-eat 
laws of, 444; real difference 
from the law of production, 
450-453; of property, 454-459; 
causes of confusions as to prop- 
erty, 460-469. 

Dollar, trade, the American, 515- 
516. 

Dove, Patrick Edward, on natural 
rights, 189-194; compensation, 
192-193. 

Dnpont de Nemours, suggested 
Physiocrats' name, 145?i. See 
Physiocrats. 



532 



INDEX. 



Economic, as used for politico- 
economic, 66 ; the unit, 69, 

Economic body, how evolved and 
developed, 20-23, 35-37, 118, 
395-396, 428 ; gives rise to and 
takes name from body politic, 
25-28 ; growth of knowledge an 
aspect of, 39-40, 41-43; how 
political economy relates to, 
68-73. 

Economics, substituted for po- 
litical economy, 128-130 ; what 
it teaches, 207. 

Economists, the French. See 
Physiocrats. 

Ego, what it is, 47, 69 ; its depen- 
dence on matter, 84-85 ; desire 
a quality of the, 246 ; determina- 
tion of value and the, 252. 

Elements. See Factor. 

Elizabeth, Queen, and monopo- 
lies, 278. 

Energy, what it is in philosophy, 
9; its correlative elements or 
factors, 9-10 ; man but passing 
mianifestation of, 13-14; its 
place in the world, 77, 80. 

Evil, outlived by good, olQn. 

Evolution, profound truth of, 85. 

Exchange, how reason impels to, 
35-37; not a separate depart- 
ment in political economy, 425- 
426 ; law of diminishing returns 
in production and, 338 ; coop- 
eration and, 332, 378, 399, 401 ; 
none of the animals but man, 
397-399; and the Greater Le- 
viathan, 35-36, 399-400 ; at the 
root of civilization, 399-401 ; 
even slavery involves it, 400; 
motive of the primary postu- 
late of political economy, 401 ; 
money the common medium of, 
495-503; all, is really the ex- 
change of services or com- 
modities, 513-524. 

Exchangeability, comes from 
value, 235-249. 

Exchanges, credit in, 491-493, 
504-511, 517, 526-528. 

Exchanging, its place in produc- 
tion, 325-328, 331-332, 354, 397- 



401, 414, 426; highest of the 
three forms of production, 400 ; 
not a part of distribution, 400, 
425-426. 

Exertion, fundamental law of po- 
litical economy and, 86-91, 99, 
254, 268, 332 ; positive and nega- 
tive, 245-249 ; desire prompts, 
246; value a relation to, 228- 
234, 242, 244-249, 253-256, 257- 
269, 275, 497-501, 503 ; manifes- 
tations of, become the common 
measures of value, 501-503; 
wealth a restdt of human, 285, 
287-288; but all human, not 
wealth, 285-287 ; essential idea 
of wealth, 292, 293 ; higher pow- 
ers of, 295-296, 369; all that 
political economy includes, 301- 
303; spacial law and, 360, 363, 
365-366 ; time and, 368-370 ; co- 
operation and, 374 ; competition 
and, 403; economic term for, is 
labor, 411; fundamental law of 
human nature, 512; value of 
paper money and, 524. 

Experiment, imaginative, as a 
method in political economy, 
29-30, 100 ; use of, 240-241, 248- 
249, 436-437, 485-487, 507. 

Factor, meaning of term, 9; 
the three, of the world, 9-10, 
47, 77, 80; the two original 
factors of political economy, 
77, 413 ; the two necessary in 
production, 279, 413 ; the three 
in general production, 405-407, 
444; land, the natural or pas- 
sive, 77, 408-410; labor, the 
human or active, 77, 80, 411- 
412; capital, the compound, 
413-415. 

Fallacies, how made to pass as 
truths, 134-136. 

Faweett, definition of wealth, 122. 

Franchises, their value from ob- 
ligation, 262-263 ; permanence 
of this value, 310-312 ; not real 
wealth, 277-278. 

Free trade, advocated by Physio- 
crats, 152-153, 165, and by 



INDEX. 



533 



Adam Smith, 164, 165; weak- 
ness in Smith's teaching of, 
182-183: sought by American 
Peace Commissioners, 195-196. 

Gainier, Marqtds, oxen used as 
money in Homer, 513w.-514w. 

Garrison, William Lloyd, change 
of public opinion towards, 
142. 

German, confused political econ- 
omy, 195-196, 197-199, 208-209, 
283-284, 345, 461; socialism, 
197-199 ; trick of verbal contra- 
diction, 341. 

God, and final cause, 47, 50, 52, 
54 ; the teologieal argument, 
50; distinct from nature, 54, 
55; how the reason posits it, 
10, 79, 403 ; the Most-Merciful, 
31 ; the All-Maker, 409 ; is just, 
451-452 ; manifestations of, 435- 
436, 443-444 ; Adam's curse, 91 ; 
made responsible for social ills, 
174, 333, 336, 355; Kant and 
Schopenhauer's substitute, 348. 

Godoonof, Boris, and serfdom, 
278. 

Good, it outlives evil, 510n. 

Goods, as used in political econ- 
omy, 282-283; the Austrian 
school, 283-284. 

Gournay. See Physiocrats. 

Growing, its place in production, 
330-331, 353-354, 358, 400, 414; 
relation of space to, 357-364. 

Guizot, vagueness in describing 
civilization, 25. 

Hawaiian Islands, Christian mis- 
sionaries, 297. 

Hegel, characterized by Schopen- 
hauer, 208-209. 

Hern, Professor, the name plu- 
tology for political economy, 
128-129. 

Historical school, its style, 206 ; 
absence of scientific method, 
448-449. 

Hobbes's Leviathan, 22, 25-26, 27 ; 
relation to Greater Leviathan, 
22-23, 27-28, 395-396. 



Homer, oxen used as money, 
513»i.-514?i. 

Horace, endurance of his odes, 
310. 

Hyndman, H. M., Spenee on 
natural rights, 185. 

Hypothesis, as a method in po- 
litical economy. See Experi- 
ment, Imaginative. 

Imaginative experiment. See 
Experiment. 

Immortality, man's belief in, 34. 
See Resurrection. 

Ivipot unique, origin and mean- 
ing, 150-151; the single tax, 
150-151. 

Increment, unearned, its mean- 
ing, 150 ; Mill on, 150, 195 ; and 
the Physiocrats, 355. 

Induction, as used in political 
economy, 92-100. 

Ingram, John Kells, old political 
economy dead, 120?i., 205-206. 

Instinct, small development of, in 
man, 16, 397-398; large devel- 
opment in animals, 15-18, 291- 
292, 397-398 ; reason and, 36-37, 
291-292, 397-399. 

Interest, Smith not clear as to, 
183 ; law of, and the correla- 
tion with the laws of rent and 
wages, treated in "Progress 
and Poverty," 202 ; one of the 
three great laws of distribution, 
444 ; futile attempts to regulate, 
445. 

Interests, special, study of polit- 
ical economy affected by, 
xxxiii.-xxxv., 132-142, 154, 167- 
168, 169, 171-176, 182-184, 207, 
273-274, 333, 447, 461. See 
Privilege, Special. 

Intrinsic. See Value. 

James, E. J., on induction and 

deduction, 97-98 ; Smith's place 
in political economy, 169 ; old 
political economy dead, 205-207. 

Jefferson, Thomas, why the rich 
were against Jesus, 132. 

Jesus, Jefferson on why the rich 



534 



INDEX. 



were against Him, 132. See 
Christ. 

Jevons, definition of wealth, 122 ; 
confusion as to, 196-197 ; value 
from marginal utilities, 218. 

" Johnson's Encyclopedia," old 
political economy dead, 206- 
207 ; definition of money, 480. 

Jones, definition of wealth, 121. 

Justice, highest aspect of civiliza- 
tion, 35 ; the government of the 
universe has its foundation in, 
451; not concerned with pro- 
duction, 451-i52, but governs 
distribution, 452 ; at the bottom 
of property, 456-459; Montes- 
quieu on, 453. 

Kant, space and time and antin- 
omy, 345-346, 348, 350; and 
Schopenhauer, 346-348 ; his 
categorical imperative, 458. 

Knowledge, man's earliest, of his 
habitat, 11 ; what it is and how 
it grows, 39-43; springs from 
cooperation, 20, 39 ; the incom- 
municable knowing called skill, 
40-41, 59 ; the communicable 
knowing called, 41-43 ; that 
properly called science, 58-64. 

Labor, value of, 240; various 
senses of, 243 ; when land value 
is a robbery of, 256 ; in relation 
to space, 357-364; relation to 
time, 368-370 ; combination and 
division of, 371-381 ; Smith on 
division of, 182, 372, 374, 380; 
impossibility of division of, 
under socialism, 394-395 ; one 
of the two factors necessary in 
production, 279, 413 ; one of the 
three factors in general produc- 
tion, 405^06, 411-412, 413-414; 
its order, 406-407; capital is 

' stored, 279, 296, 413; when cap- 
ital may aid, 414 ; capital used 
by, 414-415 ; the essential prin- 
ciple of property, 461-462 ; why, 
though the real measure of 
value, it cannot serve as the 
common measure, 495-503 ; all 



exchange is really exchange of, 
524. 

"Laissesfaire, laisses alter," 153. 

Lalor, John J., definition of polit- 
ical economy, 61-63 ; definition 
of wealth, 122. 

Lalor's Cyclopedia, induction and 
deduction, 97-98 ; Adam Smith, 
169. 

Land, basis of monopoly of, 137, 
and Mill's condemnation, 137; 
the term as used in political 
economy, 352, 408-409, 464 ; na- 
ture of its value, 240 ; value of, 
and desire, 255-256; when its 
value is a consequence of civi- 
lization and within the natural 
order, 256, and when destruc- 
tive of civilization and a rob- 
bery of labor, 256; value of 
obligation, 265-266, and not 
wealth, 265-266, 277-278, 297, 
nor capital, 297; can have no 
moral sanctions as property, 
265, and rightfully belongs to 
the community, 265 ; perma- 
nence of its value, 310-312; 
man's dependence on, 351-352 ; 
extension the fundamental per- 
ception of the concept, 352, this 
confused and limited, 78, 353- 
356 ; intensive use of, made pos- 
sible by extensive use of, 364; 
first or passive factor in pro- 
duction, 77, 405-406, 408-410, 
412-413 ; importance of observ- 
ing order of, 406-407; capital 
springs from union of labor and, 
406, 413; erroneously included in 
the category of private property, 
460-461 ; called by lawyers real 
property, 461 ; Smith's view of, 
461 ; Mill's attempts to defend 
private property in, 462; con- 
fused meanings, 463-466 ; dif- 
ferent meanings of, 466-468; 
Mill succeeds only in justify- 
ing property in the produce of 
labor, 469; of "improved" and 
"made," 463-469. 

Landowners, their influence on 
political economy, 170-175, 182- 



INDEX. 



535 



184; Smitli avoids antagonizing, 
182; true beneficiaries of pro- 
tectionism, 175-176; invalidity 
of their right to land values, 
277-278 ; compensation to, Mill, 
137-138, Spencer, 192-193, 
Dove, 192-193 j cannot contrib- 
ute to production, 409-410; 
their income and the laws of 
distribution, 460-461. 

Language, how it grows in copi- 
ousness, flexibility and beauty, 
274. 

Laughlin, definition of wealth, 
123. 

Laveleye, De, definition of wealth, 
122. 

Law, science deals with natural, 
not human, 58-60 ; the funda- 
mental, of political economy, 
86-91, 99, 254, 268, 332 ; natural, 
not human, the subject of po- 
litical economy, 61-64, 76-77, 
426,428-429 ; natural law always 
the same, 428-429, 435-436; of 
nature, what it is, 435-436, 443, 
452 ; Mill's definition, 443 ; the 
willbehind it, 435^36; common 
perception of natural, in distri- 
bution, 440-449, Mill's admis- 
sion, 440-441, 443; sequence, 
consequence and natural, 44- 
57, 440-443 ; human law con- 
fused with natural, in distri- 
bution, 440-441, 443, 448-449; 
inflexibility of, in distribution, 
443-444. 

Lawyers, and real property, 461. 

Leverson, M. K., definition of 
wealth, 122. 

Leviathan, Hobbes's, 22, 25-26, 
27; the Greater, 22-23, 27-28, 
35-36, 118, 395-396, 399-400, 
428. 

Logic. See Reason. 

Macdonald, D. C, Ogilvie on 
natural rights, 185-186. 

Machinery, in civilization, 379. 

Macleod, H. D., definition of 
wealth, 122 ; objects to Smith's 
definition, 146; his confusion. 



196-197; definition of econom- 
ics, 129 ; account of the Physio- 
crats' views, 155-158. 

Macvane, definition of wealth, 
123. 

Mascenas, his name in Horace's 
odes, 310. 

Malthus, definition of wealth, 
121; objects to Smith's defini- 
tion, 146. 

Malthusian theory, 173-174, 183, 
333-334 ; alleged law of dimin- 
ishing returns in agriculture 
and, 335, 336, 337-338. 

Man, his place and powers, 11-18, 
351-352 ; how extended in civ- 
ilization, 19-23, 29-43, 91; his 
earliest knowledge of his habi- 
tat, 11, and how it grows, 11-14 ; 
his physical nature, 13-18 ; his 
resemblance to other animals, 
13-14, 85, 291, and distinction 
fi-om them, 11-18, 19, 29, 36, 
51, 53, 56, 59, 77, 82, 85, 287, 
291-292, 397-399 ; but a passing 
manifestation of matter and 
energy, 13-14 ; his spiritual na- 
ture, 14-18, 29, 37-38, 84-85, 
287, 307 ; the social animal, 21 ; 
the artificial, in the body politic 
called Leviathan, 22, 25-26, 
27, the still greater, in the 
body economic called the 
Greater Leviathan, 22-28, 27, 
36, 118, 395-396, 399, 428; his 
belief in immortality, 34; res- 
urrection from the dead, 312 ; 
distinction of the civilized, from 
the savage, 39-43; as compre- 
hended in and as apart from 
nature, 47-48, 84-85; his laws 
distinct from political econ- 
omy, 58-61; his actions 
prompted by desire, 18, 81-82, 
the satisfaction of which is the 
fundamental law of political 
economy, 86-91, 99, 254, 268, 
332 ; he could not exist without 
desire, 83; his subjective and 
objective, material and imma- 
terial desires, 83-85 ; in the 
hierarchy of life, 85; a pro- 



536 



INDEX. 



ducer, not a creator, 324; his 
dependence on land, 77, 351- 
352 ; subject to the spacial law, 
363-364 ; his full powers to be 
utilized only in independent 
action, 392-396; his conscious 
and unconscious intelUgenee, 
395; the exchanging animal, 
398-399; the natural order re- 
quires equality with his fel- 
lows, 256; civilization makes 
no change in him as man, 507 ; 
trust or credit coeval with his 
first appearance, 510-511. 

Marginal utilities. See Utilities. 

Mark Twain, Esquimau story, 
305. 

Marshall, Alfred, definition of 
wealth, 125-126; and classifica- 
tion of goods, 283-284; teach- 
ings of Austrian school, 208- 
209; alleged law of diminish- 
ing returns in agriculture, 336. 

Marx, Karl, does not define 
wealth, 124; his teachings, 197. 

Mason, Alfred B., definition of 
political economy, 61-63; defi- 
nition of wealth, 122. 

Mathematics, and political econ- 
omy, 128n., 129-130. 

Matter, what it is in philosophy, 
9 ; one of the three elements or 
factors of the world, 9, 77 ; its 
correlative elements, 9-10 ; man 
but a passing manifestation of, 
13-14, 47 ; incases man's spirit 
or soul, 47, 84-85 ; necessity of 
man's freedom of access to, 79, 
351-352. 

McCulloch, definition of wealth, 
121; objects to Smith's, 146. 

Memory, subconscious, store- 
house of that knowledge called 
skill, 40-41, 377. 

Menger, teachings of Austrian 
school, 208-209. 

Mercantile system. See Protec- 
tionism. 

Metaphysics, proper meaning of, 
339; effect on political econ- 
omy of confusions in, 340, and 
on the higher philosophy, 340 ; 



of space and time, 339-350; 
danger of thinking of words as 
things, 340-341 ; words as used 
by Plato and the Theosophists, 
341; space and time not con- 
ceptions of things, but of rela- 
tions of things, 341-343, and 
cannot have independent be- 
ginning or ending, 343-344; 
space and time as used by 
poets and religious teachers, 

344, and by philosophers, 344- 

345, 350; Kant, 345-346, 350; 
Schopenhauer, 346-348, 350; 
mysteries and antinomies, 348- 
349 ; human reason and eternal 
reason, 349-350; "the abso- 
lute," "the unconditioned," 
"the unknowable," 350. 

Michelet,consecrated absurdities, 
140. 

Mill, John Stuart, implication of 
God in term "Law of Nature," 
55 ; definition of wealth, 122 ; na- 
ture of wealth, 137-138 ; delu- 
sions, 133-134, 137 ; his intellec- 
tual honesty, 137, 460 ; careful 
education and abilities, 432-433, 
455, 461 ; condemnation of land 
monopoly, 137-138; compensa- 
tion, 137-138; unearned incre- 
ment, 150, 195 ; course of devel- 
opment of political economy, 
176 ; his early influence on 
Henry George, 201 ; value, 215- 
219, 223 ; alleged law of dimin- 
ishing returns in agriculture, 
335-337; contention that laws 
of distribution are human laws, 
430-435, 440-443, 455, 459, and 
that produce distributes itself, 
447-448 ; utilitarianism, 455- 
459, 461 ; confusion as to prop- 
erty, 462-469; confounds the 
different meanings of land, 463- 
466. 

Mirabeau. See Physiocrats. 

Money, confusion from using it as 
a common measure of value, 
226-227 ; how it gets its power 
as a medium of exchange, 266- 
267; confusion as to the word 



INDEX, 



537 



has strengthened protection- 
ism, 280-281, 493k.; when capi- 
tal and when not, 298-299 ; when 
wealth and when not, 299ra., 313- 
314; definition of, in "John- 
son's Encyclopedia," 480 ; true 
definition of, 494, 495; confu- 
sion as to, 479-481 ; due largely 
to pressure of personal inter- 
ests, 480, but among economists 
to confusion as to wealth and 
value, 480-481 ; the medium of 
exchange and measure of value, 
481, 495-503 ; common use of the 
word, 275-276 ; common under- 
standing of, 482-494 ; use of, to 
exchange for other things, 482- 
484; Smith's sense of buying 
and selling, 484 ; present mean- 
ing of, as distinguished from 
barter, trade or exchange, 484- 
485 ; not more valuable than 
other things, but more readily 
exchangeable, 485-487, 495-496 ; 
exchangeability its essential 
characteristic, 487, 491-494 ; 
exchanges without, 485-487 ; 
checks not, 487 ; different coun- 
tries have different, 488; not 
made by governmental fiat, 488- 
490, 491; does not necessarily 
consist of gold or silver, 489- 
490, 491, or need intrinsic value, 
489-491 ; no universal, 490-494 ; 
its primary and secondary qual- 
ities, 495 ; tendency to overesti- 
mate its importance, 504-506; 
credit used before, 506, 510-511 ; 
most important use of money 
to-day, 511 ; the representative 
of value, 526; genesis of, 512- 
525 ; not an invention, but a de- 
velopment of civilization, 512 ; 
grows with growth of ex- 
changes, 512; cattle used as, 
513«.-514?i.; first purpose of 
coinage of, 513-515 ; American 
trade dollar, 515-516; lessen- 
ing uses of commodity and ex- 
tensions of credit, 516-517; 
two elements in exchange value 
of metal, 518; intrinsic value 



in, 518-528 ; seigniorage in, 518- 
519 ; Ricardo on paper, 520 ; 
may be useful though intrinsic 
value be eliminated, 520, 523- 
525; debasement immediately 
felt in first coined, or commod- 
ity, 520-523; the two kinds of, 
526-528. 

Monopoly, land, based on force 
and fraud, 137 ; condemnation 
of, by Mill, 137-138; increase 
in value of, not to common in- 
terest, 268-269 ; value of, not 
wealth, 277-278. 

Montchretien, Antoine de, first 
used term political economy, 
67. 

Montesquieu, on justice, 453. 

Mortgages, not wealth, 277; not 
capital, 296. 

Mystery, theologians' reference to 
space and time, 344-346, 348. 

Natural opportunities,not wealth, 
277-278. 

Natural order, natural laws be- 
long to the, 60 ; Physiocrats and 
the, 149-159, 164 ; single tax in 
the, 145, 159, 165-166, 167; 
equality of men intent of, 256 ; 
laws of distribution and the, 
428. 

Natural rights. See Rights. 

Nature, how manifested in the 
universe, man and the animals, 
11-18, 51-54; term law of, how 
derived, 46-54 ; word law as 
applied to, 54-55 ; meaning of 
term law of, 55-57, and Mill's 
definition, 443 ; sequence, con- 
sequence and laws of, 44-57, 
435-436, 437, 440-443; Mill's 
confusion of human laws with 
laws of, 440-443; laws of, and 
political economy, 58-61, 76-77; 
its essential distinction from 
God, 54 ; implication of God in 
word, 55-57 ; man's action sub- 
ject to laws of, 80 ; the passive 
factor or element in political 
economy, 77; interpreted by 
man's reason by assuming rea- 



538 



INDEX. 



son in, 75 ; fundamental law of 
political economy a law of, 
87-88. 

Needs, how distinguished from 
other human desii'es, 82-83, 247; 
order of, 85. 

Neweomb, definition of wealth, 
123. 

Newton, anecdote of, 395. 

Nicholson, J. Shield, does not de- 
fine wealth, 126-127. 

Nirvana, in the philosophy of 
negation, 347-348. 

Obligation, value from, what it is, 
257-269, 309 ; source of, 271, 272 ; 
it does not increase wealth, 272, 
and has to do only with distri- 
bution, 272; permanence of, 
309-312. 

Ogilvie, William, natural rights, 
185-186. 

"Our Land and Land Policy," 
philosophy of the natural order, 
163-164 ; when and how written, 
201. 

Palgrave, R. H. Inglis, " Diction- 
ary of Political Economy," 206. 

Perception, and non-perception, 
352-353. 

Perry, A, L., dispenses with the 
term wealth, 124-125, 130. 

Philosophy, meaning of term, 9; 
how the teaching of, is warped, 
138-139; that teaching of the 
extinction of desire, 83, 347- 
348 ; that concerned with grati- 
fying material needs, 85; that 
of the natural order taught by 
the Physiocrats, 149-159, 164; 
that of the natural order known 
as the single tax, 145, 159, 165- 
166, 167; that of the natural 
order in " Our Land and Land 
Policy," 163-164; that of the 
natural order and Smith, 164; 
Christ's, and a true political 
economy, 304-307. 

Physiocrats, their use of the term 
" political economy," 67 ; origin 
and meaning of their name. 



145n.; who they were and what 
they held, 148-159; cause of 
their confusion, 151-152, 354- 
355 ; real free traders, 152-153, 
165; originated term "Laissez 
faire, laisses aller," 153 ; ante- 
dated and surpassed Ricardo, 
154^155; explanation of their 
rent doctrine, 154-155; their 
views explained in "Progress 
and Poverty," 154-155; Mac- 
leod's account of their views, 
155-158 ; their day of hope and 
fall, 159, 168-169; overthrown 
by a special interest, 154; as 
single taxers, 145, 153, 159, 165- 
166, 168 ; as described by Adam 
Smith, 67, 145; his relations 
with them, 160-169, 171, 173; 
intended dedication to Quesnay, 
161-162 ; resemblance of views, 
162-165, and differences, 165- 
169; men who followed, 186- 
199; value, 220; land not 
wealth, 265-266; definition of 
wealth, 270-271. 

Plato, world of ideas, 79 ; trick of 
verbal contradiction, 340-341. 

Playfair, William, apology for 
Smith's radicalism, 173. 

Phitology, as a substitute for 
political economy, 128-129. 

Political economy, its practical 
importance, xxxi.-xxxiv., 81-85, 
280; how it must be studied, 
xxxi.-xxxix., 76, 481; purpose 
of, xxxi.-xxxii., 117; definition 
of, 3, 67, 104,115,127,301,304, by 
Mason and Lalor, 61-62 ; mean- 
ing, units and scope of, 65-73, 
276 ; origin of term, 65-67 ; con- 
cerned with natural, not human 
laws, 58-64, 76-77, 426, 428-429, 
and these laws invariable, 481 ; 
province of, 67-68, 303; ele- 
ments of, 74-80 ; its three grand 
divisions, 421; can go no further 
than distribution, 428-429 ; fun- 
damental law of, 86-91, 99, 254, 
268, 332 ; primary postulate of, 
90-91, 99, 401, 512 ; central prin- 
ciple of, 150 ; methods of, 29-30, 



INDEX. 



539 



92-100; as science and as art, 
101-104; body politic and, 
sxxiv., 67-68, 73, 428; body 
economic and, 68-73 ; institu- 
tions of learning and, xxxii.- 
XXXV., 3, 61-64, 92, 113, 119-130, 
135, 140, 174-175, 176, 180-181, 
183, 203-209, 233-234, 273, 281, 
355 ; theology and, xxxiv. ; not 
properly a moral or ethical sci- 
ence, 72-73 ; selfishness and, 
88-91, 99; riches and poverty 
in, 304^307; confusions in its 
current teachings, xxxii.-xxxv., 
61-64, 75, 78, 88, 101-104, 115, 
117-130, 131-142, 176-177, 180- 
181, 183, 196-197, 203, 210-211, 
212, 213-222, 226-234, 235-240, 
243-245, 247, 252, 273, 326, 833, 
334, 339-340, 371, 400-401, 406- 
407, 415, 429, 430-439, 440-443, 
448-449, 450-451, 459, 460-469 ; 
the "dismal science," 88, 151, 
174-175; study of, affected by 
special interests, xxxiii.-xxxv., 
130-142, 167-168, 169, 171-176, 
182-184, 207, 273-274, 333, 447, 
461; as to history of, 115, 120w., 
131-142, 169, 170-181, 182-199, 
200-209, 271 ; Physiocrats first 
developers of, 148-150 ; Smith's 
influence on, 170-181, 182; 
breakdown of Smith's, 176- 
181 ; German influence on, 195- 
196, 197-199, 208-209, 283-284, 
345, 461; Austrian school of, 
124, 208-209, 215, 218, 252 ; Say's 
hopes for, 130, 177-178, 180; 
Caimes's predictions, 179-181 ; 
why it considers only wealth 
and not all satisfactions, 301- 
303 ; its object-noun, 127, 181, 
301 ; wealth in, and in individual 
economy, 118-119, 276 ; mean- 
ing of wealth in, 270-284, 293, 
296, 340, 357 ; meaning of value 
in, 224-225; statistics and,120?i., 
181; mathematics and, 128j?-., 
129-130 ; metaphysics and, 339- 
340 ; catallactics and plutology 
as substitutes for, 128-129; 
economies and, 128-130 ; turned 



against protectionism by Smith, 
182 ; afterwards made to favor 
protectionism, 195-196 ; cojrfiict 
of socialism with a real7l98, 
403; historical school of, 206, 
448; classical school of, 208, 
448; death of old, 120n., 205- 
206 ; Christ's philosophy and a 
true, 306-307 ; places of trans- 
portation and exchange in, 325- 
326, 400-401, 425-426; proper 
meaning of word land in, 352, 
408-409, and of production, 323- 
326, 357, and of cooperation, 
372, and of labor, 411-412, and 
of distribution, 428 ; not con- 
cerned with consumption, 426, 
nor taxation, 426 ; absence of 
scientific method in current, 
448. 

Poor, cannot be under a true po- 
litical economy, 304-307; why 
Christ sympathized with the, 
306-307. 

Population, theory of. See Mal- 
thusian Theory. 

Possessions, unjust, 304-307. 

Poverty, Smith's silence on cause 
of, 183 ; cannot exist under a 
true political economy, 304-307. 

Price, current teachings as to, 
227; Adam Smith on, 229, 503; 
treated as an economic term, 
229 w.; attempts to regulate, 446. 

Privilege, special, and value from 
obligation, 262-267, does not 
increase the sum of wealth, 
277-278; not capital, 296-297. 
See Interests, Special. 

Production, began with man, 35- 
36 ; based on natural law, 461 ; 
meaning of, 323-326, 327, 357 ; 
what it involves, 327 ; differ- 
ence from creation, 323-324; 
other than of wealth, 302-303, 
324-325 ; alleged law of dimin- 
ishing returns in agriculture, 
174, 335-338; spacial law re- 
lates to all, 340, 355-356, 357- 
364, 368 ; all modes of, require 
time, 340, 365-370; cost of, a 
measure of value, 253-254; 



540 



INDEX. 



value from, 257-269, 271, 272, 
and in what it consists, 308, 
and its permanence, 309-312 ; 
place of cooperation in, 332, 
426, and its meaning, 371 ; the 
two ways in which cooperation 
increases, 371-381; the two 
kinds of cooperation in, 382- 
396 ; thought the originating 
element in, 391, and cannot be 
fused, 391-392 ; directed coop- 
eration utilizes the sum of 
men's physical powers in, 392, 
but unconscious cooperation 
utilizes the sum of their intel- 
lects as well, 392-393; man's 
full powers to be utilized in, 
only in independent action, 
393-396; how slavery checks, 
393; the Greater Leviathan 
and, 395-396 ; transportation 
included in, 326, 426 ; exchange 
also, 299, 326, 426, mistakes 
as to this, 326, 400-401; the 
three modes, 327-332, 359, 400, 
414; adapting in, 327-330, 332, 
353-354, 358 ; growing in, 330- 
331, 353-354, 357-358 ; exchang- 
ing in, 331-332, 354; office 
of exchange in, 397 - 401 ; 
office of competition in, 402- 
403 ; names and order of the 
three factors of, 405-407, 444; 
land the first factor in, 77, 279, 
408-410 ; labor the second fac- 
tor in, 77, 80, 279, 411-412; 
capital the third factor in, 413- 
415 ; appropriation has no place 
in, 415 ; how related to dis- 
tribution, 426-427, 437-439; dis- 
tribution affected through, 446- 
447, 453; division into three 
elements of, 444; real differ- 
ence between laws of distribu- 
tion and, 450-453. 

Produit net, meaning and signifi- 
cance of, 150-151. 

" Progress and Poverty," and the 
landowner's prophecy, 170-171 ; 
and validity of property, 184, 
240; Spencer's "Social Stat- 
ics," 189 ; brief history of, 200- 



201, 203 ; what it contains, 201- 
202 ; effect on scholastic politi- 
cal economy, 203-209; fixed 
meaning of wealth and capital, 
211, 270-271, 298-300; another 
method of determining mean- 
ing of wealth, 271-272; the 
Malthusian theory and, 334; 
rise of the single taxers and, 
355, 356. 

Property, its validity in the old 
political economy, 184 ; first 
really questioned in "Progress 
and Poverty," 184 ; in land 
without moral sanction, 265; 
efforts of special interests to 
prevent question of, 273-274 ; 
laws of distribution determine 
ownership of, 454; based on 
natural law, _ 454-459, 460-461; 
Mill's recognition and error, 
454r-459 ; causes of confusion as 
to, 460-469 ; pre-assumption 
that land is, 460-461 ; essential 
principle of, 461-462 ; where 
Mill is wrong, 462-469. 

Protectionism, genesis of, 134; 
Smith's attack on, 171-172, 175, 
182 ; repeal of English corn- 
laws, 176, the contest revealing 
true beneficiaries of, 175-176; 
merchants and manufacturers 
not ultimate beneficiaries of, 
175-176 ; selfishness and, 196 ; 
a form of socialism, 197 ; effect 
of, on political economy in 
Germany, 195, and in the 
United States, 179, 196, 207; 
strengthened by confusion as 
to money, 280-281, 493h,.; value 
from obligation and, 263, 264- 
265, not to common interest, 
268-269 ; competition and, 402- 
403. 

Psychological school. See Aus- 
trian School. 

Pun, what it implies, 274. 

Quesnay, Fran§ois, leader of the 
Physiocrats, 145; who he was 
and what he taught, 148-159; 
Smith's relations with, 160- 



INDEX. 



541 



162 ; resemblance of George's 
views, 163; agricultiire the 
only productive occupation, 
354-355. 
Quineey, Thomas De, value, 
215-216. 

Eae, definition of wealth, 121. 

Eeason, distinguishes man from 
the animals, 1^18, 29, 31-37, 
51, 56, 77-78, 85, 397-399 ; welds 
men into the social organism 
or economic body, 19-24, 399; 
essential qualities of, 29-30, 33, 
45-46; it impels to exchange, 
35-37 ; its process of operation, 
29-30, 47-48, 92-100; the Ego 
and, 47; impels man to seek 
causal relations, 56-57, 79 ; how 
it apprehends the world, 77, 
85 ; how it interprets nature, 
75 ; how it posits God, 79, 403 ; 
instinct and, 36-37, 291-292, 
397-399 ; metaphysics, 339 ; 
mysteries, 344-346, 348 ; antino- 
mies, 345-346, 348; pure, 346; 
Hegel and Schopenhauer, 208- 
209 ; Kant and Schopenhauer, 
346-348, 350; the human, one 
and to be relied on, 349-350; 
lunacy and madness do not 
affect, 349 ; human and eternal, 
344-350. 

Reasoning, the three methods 
used in political economy, 92- 
100 ; power of special interests 
to pervert, 135-136; Bacon on 
the right way of, 139. 

Reciprocity, exalted meaning 
given by Confucius, 306. 

Rent, the central principle of 
political economy, 150 ; xivoduit 
net, 150 ; unearned increment, 
150 ; proposition of the impot 
unique or single tax, 150-151; 
Ricardo's formulation of the 
law, 154, Physiocrats antici- 
pated and surpassed him, 150- 
151, 154-155 ; law of, treated in 
"Progress and Poverty," 202; 
Smith's theory of, 173-174, he 
was not clear as to, 183 ; theory 



of, and diminishing returns in 
agriculture, 333-334 ; related to 
agriculture in current teaching, 
356 ; one of the three laws of 
distribution, 444 ; futile at- 
tempts to regulate, 445-446. 

Resurrection, relation of value 
from obligation, 309-312. 

Ricardo, does not define wealth, 
124 ; rent doctrine and the 
Physiocrats, 154^155 ; law of 
rent, 183 ; corrects Smith as to 
rent, 173-174; restriction of 
meaning of word land, 255-256 ; 
of paper money and seignior- 
age, 520. 

Rich, Christianity made to soothe 
the, 174; cannot be any, under 
a true political economy, 304- 
307; Christ's philosophy, 306- 
307. 

Right, no business of political 
economy to explain difference 
between wrong and, 73. See 
Justice. 

Rights, natural, the Physiocrats, 
149-159; Smith, 164-165, 172; 
" Our Land and Land Policy," 
201 ; " Progress and Poverty," 
201-203; Spence, 185; Ogilvie, 
185-186 ; Chalmers, 186-187 ; 
Wakefield, 187-188; Spencer, 
188-189, 191-193; Dove, 189- 
194 ; Bisset, 194. 

Rogers, Thorold, does not define 
wealth, 124. 

Ruskin, John, repugnance to 
" dismal science," 88 ; defini- 
tion of wealth, 123-124. 

Satisfactions, of desires and, 81- 
85, 301-303, 324-325; wealth 
cannot be reduced to, 289. See 
Desire. 

Say, Jean Baptiste, definition of 
wealth, 121 ; hopes for political 
economy, 130, 177-178, 180. 

Schopenhauer, of extinction of 
desire, 83; Hegel, 208-209; 
Kant, 346-348; the world as 
will and idea, 347-348, 350. 

Science, the knowledge properly 



542 



INDEX. 



called, 58-64 ; meaning of word, 
58-59; deals with natural, not 
human laws, 59-64, 426. 

Selfishness, its place in the cur- 
rent and in the true political 
economy, 88-91, 99; and pro- 
tectionism, 196. 

Senior, definition of wealth, 121- 
122. 

Sequence, meaning of, 45 ; invari- 
able or consequence, 45-46, 55- 
56, 80, 435-436 ; of laws of na- 
ture, 44-57, 80, 435-436, 437, 
440-443; in the realm of spirit, 
366-367; Mill confuses it with 
consequence, 440-443, 

Service, two ways of satisfying 
human desire, 72-73 ; confusion 
with the word labor, 244; wealth 
essentially a stored and trans- 
ferable, 289-292; direct and in- 
direct, 290; natural or normal 
line in the possession or enjoy- 
ment of, 306 ; barter and, 505. 

Shadwell, definition of wealth, 
122. 

Shakespeare, boast of his lasting 
verse, 309-310. 

Skill, the incommunicable know- 
ledge called, 40-41, 43, 59. 

Slavery, effect of, on defining 
wealth, 131-133; effect on 
thought, 141-142; value of ob- 
ligation and, 258-259, 263 ; debt 
is, 262; economic wealth and, 
277-278 _; capital and, 296-297; 
production checked by, 393; 
exchange and, 400. 

Smart, William, teachings of the 
Austrian school, 208-209. 

Smith, Adam, meaning of term 
"political economy," 66-67 ; im- 
portance of his "Wealth of 
Nations," 89; the deductive 
method, 92 ; nature of term 
wealth, 120, 143-147, 164-165, 
229-230, 279-280, where he was 
confused, 183, 210, 271, 279 ; cat- 
tle used as money, 513«.-514n.; 
not elear-'as to capital, wages, 
or rent, 183 ; value in use 
and value in exchange, 213- 



225 ; did not confine wealth to 
money or the precious metals, 
279 ; exchange value a relation 
to exertion, 228-234, 267-268; 
price, 229, 503 ; confusion as to 
causes of value, 259-260, 265; 
the measure of value, 497, 
503 ; error in regarding land as 
property, 461 ; error as to diffi- 
culty of barter, 508-510; de- 
scription of Physiocrats, 67, 
145, relations with them, 160- 
169, 171, 173, resemblance of 
views, 162-165, independence 
of them, 165-169, as evidenced 
by "Moral Sentiments," 162; 
intended dedication of "Wealth 
of Nations" to Quesnay, 161- 
162; his work on the "Wealth 
of Nations," 160-161; Dugald 
Stewart and, 161-162, 172 ; ad- 
vocated the natural order, 164 ; 
a free trader, 164, 165, but 
failed to appreciate the single 
tax, 165-166, 167-168 ; his pru- 
dence as an individual and a 
philosopher, 167-169, 182; did 
not venture to show cause of 
poverty, 183; James on his 
place in political economy, 169, 
and Ingram's view, 205-206 ; his 
influence on the science, 170- 
181, 182 ; addressed the cul- 
tured, 170 ; backed by the 
landed interest, 171-175, 182, 
yet suspected of radicalism, 
171-173; against protectionism, 
164, 165, 171-172, 175, 182; 
weakness of his free-trade 
views, 182-183 ; mistaken as to 
cause of rent, 173-174; theory 
of wages, 167, 174, 233 ; division 
of labor, 182, 372, 374, 380 ; the 
theory of population, 174 ; 
breakdown of his political 
economy, 176-181, 200-209 ; il- 
logical teachings of, 182-183; 
selfishness in political econ- 
omy, 89-90 ; his greatness, 461. 
Socialism, its proposals, 197-199 ; 
Karl Marx's teachings, 197; 
trade-unionism, 197, 199; pro- 



INDEX. 



543 



teetionism, 197, 402; conflict 
with true political economy, 
198, 403; without religion and 
philosophy, 198; against com- 
petition, 402-403 ; that in Peru, 
198 ; its great defect, 391 ; the 
originating element in produc- 
tion is men's thought, 391, 
which cannot be combined or 
fused, 391-392 ; directed co- 
operation utilizes the sum of 
men's physical powers, 392, 
but independent action utilizes 
the sum of their intellects as 
well, 392-393; effect of subor- 
dination seen in slavery, 393; 
why socialism is impossible, 
393-396. 

"Social Statics," and natural 
rights, 188-189, 191-193. 

Socrates, Plato's trick of verbal 
contradiction, 340-341. 

Soul. See Spirit. 

Space, and metaphysics, 340-348 ; 
and theology, 344-346, 348; 
what it is in political economy, 
351-352; confusion of the law 
of, with agriculture, 174, 351- 
356, whereas it relates to all 
production, 355, 357-364; defi- 
nition of, 365 ; apprehension of 
it objective and different from 
that of time, 365-367. 

Species, development of, 333-334. 

Spence, Thomas, on natural 
rights, 185. 

Spencer, Herbert, of dogs, dSn.; 
natural rights, 188-189, 191- 
193; his recantation, 189; and 
" Progress and Poverty," 189 ; 
and "A Perplexed Philoso- 
pher," 189 ; gives postulates of 
the single tax, 192; a free 
trader, 192 ; his doctrines com- 
pared with Dove's, 191-193; 
compensation, 192-193. 

Spirit, what it is in philosophy, 
9; its correlative elements, 9- 
10 ; priority of, 10 ; its place in 
the world, 77, 79, 452 ; its place in 
civilization, 35, 37-38 ; in man, 
10,47-48,309 ; God the creative. 



10, 54, 55, 56-57, 79, 174, 452 ; 
Plato and the world of ideas, 
79; when it may have know- 
ledge of spirit, 84; dependent 
on matter, 84-85, 367 ; good and 
evil in it, not in external things, 
91 ; value of obligation and, 309- 
312 ; the originating element in 
production, 323-324, 391-392; 
sequence or time in the realm 
of, 366-367 ; laws of nature that 
relate to, 437-438; justice can 
relate only to, 451-452. 

Statistics, and political economy, 
120«., 181. 

Stewart, Dugald, Adam Smith, 
161-162, 172. 

Subsistence, man's power of in- 
creasing his, 17-18. 

Synthesis, its meaning, 29. 

Tariff. See Protectionism. 

Tax, single, the Physiocrats and 
the, 145, 153, 159, 165-166, 168; 
meaning of, 150-151; impvt 
unique, 150-151; and the nat- 
ural order, 145, 159, 165-166, 
167; Herbert Spencer on pos- 
tulates of, 192; rise of the 
movement for the, 355 ; chief 
difficulty of propaganda in the 
United States, 356. 

Taxation, not concerned with po- 
litical economy, 426; what is 
meant by single tax, 151. 

Taxes, artificial values from them 
not to common interest, 268- 
269. 

Teleological argument, 50. 

Theology, relation to current po- 
litical economy, xxxiv. ; space 
and time as mysteries in, 344- 
346, 348. 

Theosophy, the trick of verbal 
contradiction, 341. 

Thompson, Robert Ellis, old po- 
litical economy dead, 207. 

Time, and metaphysics, 340-348 ; 
and theology, 344-346, 348 ; defi- 
nition of, 365 ; apprehension of, 
subjective and different from 
space, 366 ; relatipn to spirits 



544 



INDEX. 



and to creation, 366, 368 ; all pro- 
duction requires, 368-370 ; con- 
centration of labor in, 369-370. 

Tools, their origin, 38. 

Torrens, definition of wealth, 121. 

Trade, at the base of civilization, 
35-37. 

Trade-unionism, and socialism, 
197, 199. 

Transportation, included in pro- 
duction, 326, 426 ; not concerned 
with distribution, 326, 425. 

Turgol:, on the art of darkening 
things to the mind, 63-64. See 
Physiocrats. 

Ulpian, definition of wealth, 132. 

Utilitarianism, how it befogged 
Mill, 455-459, 461. 

Utilities, marginal, value as de- 
rived from, 218, 237. 

Value, confusions as to meaning 
of, 115, 210-211, 214-225, 226- 
234; Karl Marx and, 197; in 
use and in exchange, 212- 
225 ; original meaning of word, 
213, as used by Smith, 213-214, 
Mill's objection, 214-216, and 
his confusion, 217-225; real 
meaning of, 226-234, 249, 250- 
254, 264, 467; not a relation 
of proportion, 226-228, 236, 
267, but a relation to exer- 
tion, 228-234, 235-249, 253-254, 
267-269; does not come from 
exchangeability but the re- 
verse, 236, 247-248; causal re- 
lationship to exchangeability, 
247; competition in determin- 
ing, 251, 253 ; the two som"ces 
of, 249, 257-269, 270-284, 526; 
increase of wealth not involved 
by, 257-269 ; that from produc- 
tion is wealth, 270-284; that 
from obligation relates alone 
to distribution, 272", and is no 
part of wealth, 276-278, 314, 
but outlasts that from produc- 
tion, 308-312 ; the denominator 
of, 250-256 ; land and, 240, 255- 
256, 265-266 ; slavery and, 258- 



259, 263; not a relation to an 
intrinsic quality, but to hu- 
man desire, 251-252, 513, this 
idea of, at bottom of the Aus- 
trian school, 218, 252; but 
measure of, must be objec- 
tive, 252-253; labor the final 
measure, 226-234, 249, 250-254, 
267, but money the common 
measure, and why labor cainnot 
be, 495-503; money the repre- 
sentative of, 526; competition 
and, 253-254; confusions in, 
from use of money, 266-267; 
utility and desirability and, 
214-221 ; marginal utilities and, 
218, 237 ; special interests and, 
273-274. 

Value, intrinsic, what it is, 221- 
222; not necessary to money, 
489-490, 491 ; as an element in 
money, 518-528. 

Vested rights. See Interests, 
Special. 

Vethake, definition of wealth, 122. 

Wages, Smith's truth and error, 
167, 174, 233; law of, and 
"Progress and Poverty," 202; 
origin and nature of, 233 ; cur- 
rent doctrine of, 333 ; value of 
labor, 240; one of the three 
great laws of distribution, 444 ; 
futile attempt to regulate, 445. 

Wakefield, Edward Gibbon, per- 
version of natural rights, 187- 
188. 

Walker, Francis A., looseness as 
a statistician, 120h. ; definition 
of wealth, 123, 278w. ; alleged 
law of diminishing returns in 
agriculture, 335. 

Wants, how distinguished from 
other human desires, 82-83, 247 ; 
order of, 85. 

War, increased values attending it 
not to general interest, 268-269. 

Wealth, primary term of political 
economy, 117 ; its object-noun, 
127, 181, 301 ; origin of the eco- 
nomic term, 118 ; common mean- 
ing of the word, 117-119, 140 ; 



INDEX. 



545 



danger of using it in this mean- 
ing, 280-284; confusions as to 
its economic meaning, 115, 117- 
130, 176-177, 181, 210 ; Whately 
on one of its ambiguities, 141 ; 
definition of, by economic 
writers since Smith, 121-127, 
278«.; failure of the scholastic 
economists, 203-204, one of the 
latest scholastic conceptions of, 
127, real difficulty that besets 
their formulation of a true def- 
inition, xxxiii.-xxxv., 131-142, 
167-169, 273-274; Aristotle's 
definition, 132 ; Ulpian's defini- 
tion, 132; ineffectual gropings 
towards a determination of, 182- 
197 ; Smith's meaning of, 120, 
143-147, 164-165, 229-230, 279- 
280, yet he is not altogether 
clear, 183, 210, 271, 279 ; Physi- 
ocrats' clear understanding of, 
149, 158, 164-165; different 
method from that used in 
" Progress and Poverty " in fix- 
ing meaning, 270-272 ; the true 
meaning in political economy, 
270-284; proper definition of, 
270-271, 272, 276, 279, 287-288, 
293, 296, 340, 357 ; what is meant 
by increase of, 278-279; genesis 
of, 285-292 ; though it proceeds 
from exertion, all exertion does 
not result in, 285-287, nor yet 
can the idea he reduced to that 
of satisfaction, 289 ; its essen- 
tial character, 288, 289-292, 295, 
301 ; why political economy 
does not consider all satisfac- 
tions, but only wealth, 301-303 ; 
' ' actual " and ' ' relative," 282 ; 
it comes solely from produc- 
tion, 272, which is checked by 
slavery, 393, and increased by 
cooperation, 399-401 ; econo- 
mists agree that all, has value, 
210 ; its value comes from pro- 
duction, 272; the value from 
obligation relates only to the 
distribution of, 272 ; its produc- 
tion involves space and time, 
340, 357-370; money con- 



founded with, 493h.; that which 
is called capital, 293-300; all 
capital is, 294-295, 296 ; not con- 
sidered after distribution, 427- 
428 ; no single word in English 
to express the idea of an arti- 
cle of, 282; use of the word 
commodity, 282 ; and of good, 
282-284; desire for, is legitimate 
in political economy, 304 ; moral 
confusions as to, 304-307 ; per- 
manence of, 308-312 ; labor 
the only producer of, 415 ; why 
generally regarded as sordid 
and mean, 305-307; that part 
called capital, 293-300, 413; 
land not, 257-269, 277-278; 
other spurious wealth, 137, 257- 
269, 276-282, 296-297, 299w., 313- 
314; some money is, some is 
not, 299w., 313-314. 

"Wealth of Nations," its impor- 
tance as a book, 89; comparison 
with "Progress and Poverty," 
120n.; what it accomplished, 
170-173 ; its illogical character, 
182-183. 

Whately, Archbishop, eatallactic- 
as substitute name for political 
economy, 128-129 ; ambiguities 
of the word wealth, 141. 

Wieser, teachings of Austrian 
school, 208-209. 

Will, included in the element of 
the world called spirit, 9-10, 77, 
88 ; in man, 10, 47, 309 ; causal 
relations, 48-51; that behind 
nature's laws superior to that in 
man, 51-57, 59-60, 80, 444; place 
of human, in political economy, 
76, 79-80 ; good and evil not in 
external things, but in, 91; 
original meaning of distribution 
and, 434-437; natural laws of 
distribution and, 437-438 ; right 
or justice, ought or duty and, 452. 

World, the three factors or ele- 
ments of, 9-10, 47, 77, 80; its 
origin, 10, 79, 367, 403. 

Wrong, no business of political 
economy to explain difference 
between right and, 73. 



HJa'OS 



